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 |
