SE23323 - Car benefits: calculating the car benefit charge 99/2000 to 2001/02; percentages of list price for different business mileage bands; 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 mile 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. 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 SE23315 for details of how these figures are calculated). The car benefit charge is calculated at 25% of the price of the car as regards the year for 500 or more business miles and at 15% 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 SE23315 for details of how these figures are calculated). For that car, 2,000 or more business miles are needed for the car benefit charge to be calculated at 25% and 14,400 or more business miles are needed for it to be calculated at 15%.

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

See example SE23316 for details of how the calculation works in a tax year which includes a leap year February