# EIM24460 - Car benefit calculation Steps 1-4, examples: classic car

## Section 147 ITEPA 2003

When working through this example you may find it useful to refer to

• the method statement in Section 121(1) ITEPA 2003, see EIM24015 (this page illustrates steps 1-4)
• the flowchart for steps 1-4 at EIM24055
• the guidance on classic cars at EIM24400 onwards.

### Example

On 1 May 2003 a company buys a car for £12,000 and provides it for private use to the director. The director contributes £2,000 to the cost. It was first registered in 1971 and had a list price then of £2,800 (assume this can be established with reasonable certainty). During the year the car is renovated at a cost of £5,000 and on 5 April 2004 it has a market value of £17,500.

### Normal calculation: steps 1 to 4 for 2003/04

 Section 121 Item Price of item, £ Running total, £ Step 1 2,800 2,800 Step 2 Accessories - assume that renovations simply involve provision of replacement accessories (see EIM24255) and that no additions are necessary at step 2. 0 2,800 Step 3 Capital contributions. 2,000 800 Step 4 Interim sum (figure at Step 4 without the classic car rules; amount carried forward from Step 3 from 2011/12). 800

### Consideration of classic car rules

However, the normal calculation is not the end of the story. The conditions in Section 147(2) are fulfilled:

• the age of the car at 5 April 2004 is at least 15 years
• its market value for the year is £17,500, which is more than £15,000.
• that value exceeds the amount carried forward from step 3 of Section 121(1) (£800)

The car is therefore a classic car within Section 147 (see EIM24400 onwards). Section 147(2) therefore specifies the following action:

• for the amount carried forward from step 3 substitute the market value of the car for the year less any deductions under Subsection (6), capital contributions to classic cars.

### Calculation using classic car rules: steps 1 to 4 for 2003/04

 Section 121 Item Price of item, £ Running total, £ Step 3 (Car plus accessories less capital contribution, as above). 800 800 Cancel this 800 0 and replace by market value less capital contribution 17,500 2,000 15,500 Interim sum (final figure at step 4; amount carried forward from Step 3 from 2011/12). 15,500