SE23070 - Car benefits: cars provided by the employer for members of the employee’s family or household - removal of tax charge in certain circumstances - ESC A71

Extra Statutory concession A71

Extra Statutory Concession A71 removes (or in the context of SE23075, reduces) the car benefit charge that would otherwise apply under the strict application of the legislation. You should therefore ascertain the precise statutory position, before moving on to consider whether or not the terms of ESC A71 apply.

All of the guidance on car benefits from SE23001 onwards is relevant to ascertaining whether or not a car benefit charge applies. But you may find it particularly useful to refer to the guidance at SE23060 and SE23061 on cars made available to family members and automatic deeming of “by reason of the employment.”

The situation which most commonly gives rise to difficulty is where

• the employer is a “close company”, usually a small family company
• both the director and another member of the family work for the company, and
• the director and the other member of the family are each provided with company cars.

In these circumstances the legislation deems both cars to be provided by reason of the director's employment ( SE23060 and SE23061). However, Extra Statutory Concession A71 provides an exemption where

• the family member is also subject to a car benefit charge in respect of the car, or
• the family member for whom the car is made available is not themselves liable to a benefit charge in respect of the car, but either
• • ESC A71 conditions (a) and (b), or
  • ESC A71 conditions (a) and (c)

are satisfied.

The text of the relevant part of the Concession is as follows:

“A director or employee earning at a rate of £8,500 a year or more will not be taxed on the benefit of a car made available for private use to a member of his family or household if the person to whom the car is made available is chargeable on the benefit in his or her own right.
A charge will similarly not be made on any relative when the person to whom the car is made available is not chargeable on the value of the benefit, provided
a) that person receives the car in his or her own right as an employee, and
b) either it can be shown that equivalent cars are made available on the same terms to employees in similar employment with the same employer who are unrelated to directors and those earning £8,500 a year or more, or
c)that the provision of an equivalent car is in accordance with the normal commercial practice for a job of that kind.”

In cases where fuel is provided for private motoring in a car (or cars) to which a car benefit charge applies, the Concession applies to the car fuel scale charge as well as to the car scale charge.

For guidance on how to apply the (a), (b) and (c) in the second part of ESC A71, see SE23071.