Company car

By Tolley
  • (Updated for Budget 2020)

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Company car
  • Benefit in kind charge
  • Step 1 ― list price
  • Step 2 ― accessories
  • Step 3 ― capital contribution by the employee
  • Step 4 ― interim sum
  • Step 5 ― appropriate percentage
  • Step 6
  • Step 7 ― availability
  • Step 8 ― private use contribution
  • What does the company car benefit cover?
  • Cash alternative
  • Cars leased from the employer
  • Exceptions to the car benefit charge
  • Tax planning
  • Other issues
  • Tax treatment where the car is provided via salary sacrifice arrangement

One of the most common benefits offered by employers to their employees is the provision of a company car and fuel for private motoring. See the Fuel for company cars and vans guidance note for a discussion of fuel benefit.

A company car is one which is provided for the employee to use privately but where the ownership of the car does not pass to the employee. If the car is given outright to the employee, there is still a benefit in kind charge, but it is under different provisions and is calculated differently. See the Assets transferred by the employer guidance note.

Normally, the cash equivalent of the benefit is shown in section F of form P11D . The figure from the P11D is copied into box 9 of the employment supplementary page  to the tax return. However, this is not the case if the benefit has been payrolled. In that situation, the benefit does not need to be reported on a form P11D, and does not need to be listed separately on his tax return. The taxable amount and tax deducted are included in the overall figures on the form P60 that are entered into boxes 1 and 2 of the employment supplementary pages . See the Employment income guidance note. 

Employment notes , page EN2

HMRC provides an Expenses and benefits from employment toolkit  which is a guide for employers and their advisers on the risks associated with the end of year forms P11D. The toolkit is updated annually.

Also see Checklist ― company car and fuel for issues to consider when dealing with clients with company cars and fuel benefit.

As with any other kind of employment reward, if the car is provided by a third party rather than the employer, it is worth considering whether the disguised remuneration provisions in ITEPA 2003, Part 7A apply, as those rules have priority over most of the other rules for taxing employment income. If there is no third party,

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