How are company cars taxed as a benefit in kind?

Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Cars: reduction where shared car Reduction of cash equivalent where car is shared 148 1 This section applies for the purposes of sections 121 and 121B if in a tax year a car— a is available to more than one employee concurrently, b is so made available by the same employer, and c is available concurrently for each employee’s private use, and two or more of those em

This page relates to step 5 of the method statement in section 121(1) ITEPA 2003, see EIM24015. The car benefit charge is calculated by multiplying the interim sum at step 4 (the price of the car and accessories, see EIM24010 onwards) by the appropriate percentage based on the car’s carbon dioxide (CO2) emissions, which is determined at step 5. Guidance on the appropriate percentage is in this section of the guidance, which is set out as follows: finding the approved CO2 emissions figure, see EI

Taxpayers have been known to argue that a different basis of valuing the benefit should be used if a cash alternative to the car is offered (but not taken). Section 119 ITEPA 2003 makes it clear that the mere fact that a cash alternative is offered does not change the method of calculation of the cash equivalent of the car benefit.

Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Cars: benefit treated as earnings Benefit of car treated as earnings 120 1 If this Chapter applies to a car in relation to a particular tax year, the cash equivalent of the benefit of the car is to be treated as earnings from the employment for that year. 2 In such a case (including a case where the cash equivalent of the benefit of the car is nil) the employee is

Class 1A National Insurance contributions are payable on most benefits in kind (such as company cars made available for private use) and are paid by the employer not the employee. The employer calculates the contribution on an annual basis using the cash equivalent of the benefit. Class 1A NIC does not count towards any state benefits.

This page relates to step 5 of the method statement in Section 121(1) ITEPA 2003, see EIM24015. For all cars first registered before 1 January 1998, the appropriate percentage used to calculate the car benefit charge is based on engine size. This is still the case even if (exceptionally) there is a CO2 emissions figure available for such a car. This is because the European Union rules about measuring and recording CO2 emissions for new cars on sale did not apply before 1 January 1998, so CO2 emi

Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Cars: benefit treated as earnings Method of calculating the cash equivalent of the benefit of a car 121 1 The cash equivalent of the benefit of a car for a tax year is calculated as follows— Step 1 Find the price of the car in accordance with sections 122 to 124A . Step 2 Add the price of any accessories which fall to be taken into account in accordance with sectio

Class 1A NICs liability arises on the benefit of a car provided on or after 6 April 2000, if the car is made available to: a director or an employee within the benefits code (see NIM13080) and made available: by reason of the director’s or employee’s employment; and for the private use of either the director or employee; or members of their family or household and chargeable to income tax under ITEPA 2003. As the benefit of a car provided for private use attracts a car benefit charge under the

This page relates to step 5 of the method statement in section 121(1) ITEPA 2003, see EIM24015. It will help in understanding the guidance following this paragraph if you are familiar with the introduction to the appropriate percentage at EIM24500. The guidance on this page explains which cars will have an approved CO2 emissions figure. Only cars first registered on or after 1 January 1998 can have an approved CO2 emissions figure for the purposes of the car benefits legislation. All cars first

under regulation 67B (real time returns of information about relevant payments) or 74 (annual returns of relevant payments)). Quarterly return if a car becomes available or unavailable (Form P46 (Car)) 90 1 This regulation applies if— a section 120 (benefit of car treated as earnings) or 120A (benefit of a car treated as earnings: optional remuneration arrangements) of ITEPA treat the benefit of a car as giving rise to an amount as earnings of an employee received in a tax year, and b one or mor

From tax year 2019 to 2020 onwards, the amount foregone which is taken into account in working out the taxable benefit in kind includes any amount forgone in connection with associated costs (such as insurance, servicing, vehicle tax and breakdown recovery etc). In the example above, this would mean that the full amount of £6,000 sacrificed by the employee in exchange for the availability of the car should be compared with the modified cash equivalent of the benefit of the car, which was £5,000.

As explained at EIM23015, the first stage in looking at car benefits is to consider whether all the conditions for a car benefit charge to apply are present. If they are, the charge itself arises under Section 120 ITEPA 2003. The conditions are set out in Section 114(1) and (3) ITEPA 2003. A car benefit charge applies when: a car (see EIM23100 onwards) is made available (see EIM23200) to an employee (including a director) (or to a member of their family or household) (see EIM20504) without any t

From 6 April 2017, the Income Tax and NICs advantages where benefits are provided through arrangements in which the employee gives up the right to an amount of earnings in return for a benefit are largely withdrawn. Guidance on optional remuneration arrangements from 6 April 2017 starts at EIM44000. Transitional provisions apply for a limited period. For further details see EIM44030. Certain benefits in kind are excluded from the changes. For further details see EIM44130. The optional remunerati