Company cars

Produced by Tolley in association with Philip Rutherford
Company cars

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Company cars
  • Introduction
  • Employees chargeable to tax
  • Is there a car benefit?
  • What counts as a car?
  • The car must be made available by reason of the employment
  • Available for private use
  • Calculating the benefit
  • The pricing stages ― calculating the notional price
  • Step 1 ― list price
  • More...

Introduction

Company cars are one of the most common taxable benefits. In addition, they have quite a number of complex rules and onerous reporting requirements. Company cars are covered by very specific legislation.

Detailed guidance on each of the following sections to cover specific circumstances is available at Simon’s Taxes E4.625, from HMRC at EIM23000 and within HMRC’s 480: Expenses and benefits ― a tax guide.

If the employer provides a cash alternative to the provision of a company car, this is subject to tax and NIC in the same way as salary.

Employees chargeable to tax

A taxable benefit arises on the provision of a company car by an employer to an employee or a member of his family or household (without the transfer of ownership), where that car is available for non-business use.

The car benefit charge is designed to cover all the running costs of the car, such as service, insurance, road tax and congestion charge, and even covers fixed penalty notices provided the notice is attached to the car. Therefore, these costs are not charged as benefits in their own right.

However, this exemption does not extend to the provision of a driver, which is subject to the rules in ITEPA 2003, ss 201–210.

Is there a car benefit?

What counts as a car?

For a taxable benefit to arise, the vehicle must be a car. A car is defined in ITEPA 2003, s 115 as a mechanically propelled vehicle which is not a goods vehicle, a motor cycle, an invalid carriage or a vehicle that is not commonly used as a private vehicle and unsuitable to be used as such. Therefore, every motor vehicle is treated as a car unless it meets the definition of one of the exceptions.

Generally, what constitutes a goods vehicle will be obvious but there is further consideration of what is covered by this exception in the Heavy goods vehicles guidance note.

What constitutes a motor cycle and invalid carriage are covered

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