EIM23531 - Car benefit: calculation of charge: deduction for payments for private use of the car: payments for specific supplies or services

Section 144 ITEPA 2003

CIR v Quigley (67TC535)

Before reading the guidance that follows this paragraph, ensure that you are familiar with:

• the method statement in Section 121(1) ITEPA 2003, see EIM23101 (this page illustrates step 8)
• the guidance on step 8 at EIM23530.

Not all payments by an employee will necessarily qualify as private use payments that reduce the car benefit charge. A payment for specific supplies or services, such as petrol, insurance, or car washing, will not count. This is so, even if the employee is required to make such payments as a condition of having the car available for private use. The reason for this is that a payment made directly for insurance or for some other supply or service is not a payment for private use. This view was upheld by the Court of Session in Scotland in the case of CIR v Quigley (67TC535).

The judgement in Quigley only applies to payments that are made for the specific service or supply. It does not provide grounds for excluding costs that the employer may take into account as part of the calculation of the amount the employee is required to pay for the private use of the car. When doing this calculation it is not uncommon for the employer to use a formula that recognises car-related costs met by the employer such as road tax, servicing costs etc. If it is clear from the terms and conditions governing the availability of the car that the payment is:

• subject to a requirement in the year to make payments as a condition of the car being available for private use and
• for that private use

then the fact that the level of that single private use payment is calculated with reference to specific underlying costs does not change the nature of that payment. So a payment that clearly satisfies these two conditions will qualify to reduce the amount of the car benefit at step 8 in accordance with Section 144 ITEPA 2003, irrespective of the individual components that have contributed to the calculation of that single payment for private use.

If, unusually, VAT is chargeable in respect of the private use payments, it is the total amount including VAT that qualifies to reduce the benefit charge.