Cars and vans available for private use – when a benefit charge is incurred (480: Chapter 11)
Find out about the private use of company cars and vans and when a benefit charge is incurred.
Overview
11.1
This chapter relates to company cars for the period from 6 April 2003 and to company vans from 6 April 2005.
11.2
‘Company car’ or ‘company van’ are the terms used in this guidance to describe a car or van for which an employee is chargeable to car or van benefit. ‘Vehicle’ denotes car or van.
Definitions of car and van
11.3
Section 115
Car means any mechanically propelled road vehicle except:
- a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description), for example, a lorry – estate cars and off-road recreational vehicles count as cars
- a motorcycle
- an invalid carriage
- a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used, for example, a Grand Prix racing car
Car is defined in legislation. This means that it can include vehicles which are not cars within the usual day-to-day meaning of the word car.
11.4
Van means:
- a vehicle of a construction primarily suited for the conveyance of goods or burden of any description (this does not include people)
- with a design weight (the weight which the vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden) not exceeding 3,500 kilograms
Definitions of car and van: double cab pick-ups
11.5
With effect from 6 April 2002, vehicles commonly known as ‘double cab pick-ups’ are classified as cars or vans in line with their treatment for VAT. For more information, go to the Employment Income Manual.
There’s no change to the treatment of these vehicles in earlier years, or to the existing treatment of any other vehicles.
When a charge is incurred
11.6
Section 114 and Section 120(cars) or Section 154 (vans)
A car or van benefit charge is incurred whenever these conditions are met:
- a car or van
- is made available
- without any transfer of the property in it
- to an employee (or to a member of the employee’s family or household)
- by reason of the employment
- is available for private use
11.7
Section 114(3A)
In addition, for a van benefit charge to be incurred from 6 April 2005 onwards, private use by the employee or by a member of their family or household must be more than ‘insignificant’ (see paragraph 14.5 onwards).
Vehicles part owned by the employee
11.8
The High Court has confirmed that car benefit applies to these cars and has always done so. The judgement applies equally to vans.
Car or van provided by the employer
11.9
Section 117 Section 721(4)(5)
Where a vehicle is made available for the private use of an employee (or members of their family or household) by the employer it’s deemed to be made available by reason of the employment, that’s to say, it’s deemed to go with the job.
There’s one statutory exception to this. This is where the employer is an individual and it can be shown that the vehicle was provided in the normal course of ordinary domestic, family or personal relationships. For example, an individual who employs a son might, as a parent, provide the son with a vehicle to be used for private purposes only.
Facts in support of a claim that it had been so provided would be that it had not been treated as a business asset and that no expense or capital depreciation allowance relating to it had been allowed as deductions in computing the parent’s taxable profits.
Unless specified otherwise, members of an employee’s family or household include the employee’s:
- spouse or civil partner
- sons, daughters, and their spouses or civil partners
- parents
- domestic staff
- dependents
- guests
11.10
Sections 169 and 169A
In addition to the statutory exemption mentioned above, a director or employee for 2015 to 2016 earning at a rate of £8,500 or more a year is not taxed on the benefit of a vehicle, or of fuel for that vehicle, made available for private use to a member of their family or household if the person to whom the car was made available is chargeable on the benefit in their own right.
A charge is similarly not made on any relative where the person to whom the vehicle was made available is not chargeable on the value of the benefit, provided that the person receives the vehicle in their own right as an employee, and either it can be shown that:
- equivalent vehicles are made available to employees in similar employment with the same employer who are unrelated to directors or employees
- that the provision of an equivalent vehicle is in accordance with the normal commercial practice for a job of that kind
Cash alternatives to a company vehicle
11.11
Where an employee has the option of giving up the use of a company vehicle in return for a cash payment, the tax treatment depends on the choice made by the employee. If the employee keeps the use of the company vehicle, the benefit is taxed accordingly. If the employee gives up the vehicle and takes the cash, the cash will form part of the employee’s remuneration for tax purposes.
Calculating the charge
11.12
Where a charge applies, details of how to calculate it are at:
- chapter 12 for car benefit
- chapter 14 for van benefit
If fuel is provided for the vehicle, see paragraph 11.16.
The scope of the charge
11.13
Sections 120, 149 and 154
The car, van and fuel benefit charges mentioned in this chapter, and in chapters 12 to 14, are normally the only tax charges which can be made for the benefit derived by an employee (or members of the employee’s family or household) from a vehicle made available for private use by reason of their employment or from fuel provided for that vehicle. However, the expense of a chauffeur continues to count as an additional benefit, see paragraph 11.15.
Private motoring expenses paid directly on behalf of, or reimbursed to, the employee for a company vehicle will not give rise to a tax liability in addition to the car, van and fuel benefit charge mentioned in this chapter and chapters 12 to 14.
11.14
Certain motoring expenses not separately charged to tax must be taken into account in addition to the vehicle and fuel benefit charges in determining whether or not an employee is remunerated at a rate of £8,500 or more a year (see paragraph 1.7).
The motoring expenses in question are those which are met by:
- the settling of a debt incurred personally by the individual for motoring expenses
- the reimbursement of expenditure incurred by the employee in connection with the vehicle
- vouchers or credit cards provided by the employer or by reason of the individual’s employment
Approved Mileage Allowance Payments (AMAPs) are not taken into account, but the rate of remuneration is calculated without the benefit of any Mileage Allowance Relief (see chapter 16).
Expenses of a chauffeur
11.15
Section 239(5)
The expense incurred by an employer in the provision of a chauffeur, whether for a company vehicle or an employee’s own private vehicle, is a separate benefit assessable on the employee. The cash equivalent of that benefit is calculated in the same way as for other benefits in kind (see chapter 6).
Provision of fuel
Relevant legislation:
11.16
Sections 149 to 153 (cars) Sections 160 to 164 (vans)
The car or van benefit charge does not cover fuel provided for the company vehicle. If fuel is provided for a company car, or for a company van for which the benefit charge is under paragraph 14.3, a fuel benefit charge is also incurred.
chapter 13 deals with the fuel benefit charge.
Exceptions to the car or van benefit charge
11.17
Sections 167 and 168 Section 118(1) Section 247
The only exceptions to the car, van and fuel benefit charges are:
(a) Pooled cars or vans (see chapter 15).
(b) Vehicles in which private use by the employee is specifically prohibited and which are not so used – both requirements must be satisfied for the exemption to apply.
(c) Cars provided for home-to-work travel to employees who are disabled if all these conditions are met:
- the car has been adapted in accordance with the employee’s needs (or is an automatic where the employee’s disability prevents them from driving any other car)
- it’s only made available for business travel, home-to-work travel and travel for training within one or more of Sections 250, 255 and 311 – other private use by the employee and any other person is prohibited
- no other private use is in fact made of the car
Section 248A
(d) From the 2004 to 2005 tax year only, emergency vehicles meeting the conditions in paragraphs 11.18 to 11.22 below. They’re also exempt from the general benefits charge (see chapter 4).
Exceptions: emergency vehicles (from 2017 to 2018 onwards)
11.18
The person (this condition must be met). Only those ‘employed in an emergency service’ qualify for the exemption. This means:
- constables and other persons employed for police purposes
- persons employed for the purposes of a fire, or fire and rescue service
- persons employed in the provision of ambulance or paramedic services
11.19
The vehicle (this condition must be met). For the purposes of this exemption, an emergency vehicle:
- is a vehicle which is used to respond to emergencies, and
- either has fixed to it a lamp designed to emit a flashing light for use in emergencies (‘fixed’ indicates that the light must be a permanent fitting to the vehicle – it need not be permanently fixed to the exterior of the vehicle, but a vehicle with only a light which can be removed from the vehicle is not an ‘emergency vehicle’ for the purposes of this exemption), or
- would have such a lamp fixed to it but for the fact that a special threat to the personal physical security of those using it would arise by reason of it being apparent that they were employed in an emergency service
11.20
The terms (this condition must be met): the emergency vehicle must be made available on terms which prohibit its private use other than when the person is on call (paragraph 11.21) or commuting (paragraph 11.22).
11.21
The person is ‘on call’ (either this condition or the next one must be met):
- at the time they use the emergency vehicle, the person must be liable, as part of normal duties, to be called on to use it to respond to emergencies
- use is not limited to ordinary commuting, but such use as is permitted can only be reasonably local to the area in which the employee lives and works (they’re unlikely to be in a position to meet the previous bullet in this condition otherwise)
11.22
The person is engaged in commuting (either this condition or the previous one must be met):
- at the time they use the emergency vehicle the person must be required to do so in order that it’s available for their use, as part of normal duties, for responding to emergencies
- the emergency vehicle can only be used for ordinary commuting, or for travel between 2 places that’s for practical purposes substantially ordinary commuting
Cars and vans in the motor industry
11.23
Problems can arise in the motor industry in respect of demonstration, test and experimental vehicles. Where, as part of their normal duties, sales staff or demonstrators have to take a vehicle home for the express purpose of calling on a prospective customer, the vehicle will not on that account alone be regarded as available for private use.
If, however, such a vehicle is otherwise available for the employee’s private use, for example, at weekends or holidays, the appropriate car or van benefit charge will be assessable on the employee concerned.
11.24
The use of test or experimental vehicles by engineers in both the motor and components industries will be considered on the particular facts of the case. Any private use of the test or experimental vehicle by the employee will result in a taxable car benefit charge.
Business travel and private use
11.25
‘Business travel’ means travel for which expenses would qualify for deduction if they were incurred by the employee. Broadly, this means travelling expenses which involve 2 types of business journey – journeys which employees:
- have to make in the performance of their duties
- make, to or from a place they have to attend, in the performance of their duties – but not journeys which are ordinary commuting or private travel
Detailed guidance on the types of journey which give rise to qualifying travelling expenses is contained in the 490: Employee travel – A tax and National Insurance contributions guide for employers.
11.26
Section 118(2)
‘Private use’ means any use other than for the employee’s business travel. This therefore includes commuting journeys.