SE23304 - Car benefits: calculating the car benefit charge 1994/95 to 1998/99; reduction for business travel; car available for only part of a year; change of car; cars held consecutively

Paragraph 3 Schedule 6 ICTA 1988

Where the car is available for only part of the tax year, the 2,500 and 18,000 miles thresholds are reduced proportionately by reference to the days when the car was unavailable during the year. See SE23501 for the definition of “unavailable”.

The limits apply separately to each successive car held during the year. If there is a change of car during the tax year,

• the limits must be reduced for each car, and
• then compared with the business mileage driven separately in each car.

This is because each car will have been unavailable for part of the tax year.

For instance, if a car is available for the first 73 days of a tax year which does not include a leap year February, the business mileage limits are reduced to 500 and 3,600 miles for the car (See example SE23310 for details of how these figures are calculated). The car benefit charge for the car is reduced by one third for 500 or more business miles and by two thirds for 3,600 or more.

If another car is then provided for the rest of the tax year, the business mileage limits are 2,000 and 14,400 miles. (See example SE23310 for details of how these figures are calculated). For that car, 2,000 or more business miles are needed to reduce the car benefit by one third and 14,400 or more business miles are needed to get the two thirds reduction.

This method of calculating the mileage discounts was upheld by the High Court in the case of Henwood v Clarke (69TC611).

See example SE23311 for details of how the calculation works in a tax year which includes a leap year February