EIM23610 - Car benefit: Emergency vehicles: charge to tax
Section 205 ITEPA 2003
Transitional legislation from 2017/18 to 2019/20
The rules for calculating the taxable value of an asset provided to an employee which is made available for private use changed with effect from 6 April 2017.
Prior to the 2017/18 tax year, the method of calculating the value of the benefit was based on the ratio of private miles to total miles. This was no longer possible under the new rules introduced by Finance Act 2017. These changes had a significant effect on employees of the emergency services who are allowed to make private use of emergency vehicles.
The government has introduced legislation in Finance Act 2019 to allow the previous basis of calculation to continue for a limited period in respect of emergency vehicles only.
Treatment prior to the 2020/21 tax year
This transitional legislation will apply retrospectively from 6 April 2017 and will remain in force until 5 April 2020.
What employers need to report for tax
Where:
· an emergency vehicle which is available for private use has been provided to an employee; and
· prior to 6 April 2017 the benefit of that vehicle had been calculated using the ratio of private miles to total miles,
the private mileage ratio basis of calculation may be applied up to and including the 2019/20 tax year. The value of the benefit should be reported in the normal way on a P11D.
Example:
An employee in the emergency services is provided with an unmarked emergency vehicle on 6 April 2017 that is available for private use throughout the tax year. The vehicle has a market value when first provided of £26,705. The employee’s total mileage during the year is 3,576, of which 2,169 represents business mileage. Running costs borne by the employer are £993. The employee makes a monthly contribution of £100 per month from net pay.
The employee’s taxable contribution is worked out as follows:
| £ | |
|---|---|
| 20% of market value | 5,341 |
| Running costs such as fuel and insurance | 993 |
| Total cost: | 6,334 |
| Less: Costs attributable to business use | 3,842 |
| £6,334 x (2,169 / 3,576) (business miles / total miles) | |
| Interim value of taxable benefit | 2,492 |
| (£6,334 - £3,842) | |
| Less: Contributions made by employee for private use | 1,200 |
| Net taxable benefit | 1,292 |
Treatment from the 2020/21 tax year
For all emergency vehicles that are not exempt from tax under section 248A ITEPA 2003, the new rules on the valuation of assets made available for private use must be used from 6 April 2020 onwards (see EIM23615 and EIM21885 onwards).