EIM24460 - Car benefit calculation: steps 1 to 4: example: classic car

Section 147 ITEPA 2003

When working through this example you may find it useful to refer to:

  • the method statement in section 121(1) ITEPA 2003, see EIM24015 (this page illustrates steps 1 to 4)
  • the flowchart for steps 1 to 4 at EIM24055
  • the guidance on classic cars at EIM24400 onwards

Example

On 1 May 2020 a company buys a car for £12,000 and provides it for private use to the director. The director contributes £2,000 to the cost. It was first registered in 1981 and had a list price then of £2,800 (assume this can be established with reasonable certainty). During the year the car is renovated at a cost of £5,000 and on 5 April 2021 it has a market value of £17,500.

Normal calculation: steps 1 to 4 for 2020 to 2021

Step Method Amount Running total
Step 1 List price £2,800 £2,800
Step 2 Accessories - assume that renovations simply involve provision of replacement accessories (see EIM24255) and that no additions are necessary at step 2 £0 £2,800
Step 3 Less capital contributions £2,000 £800
Step 4 Interim sum (figure at step 4 without the classic car rules; amount carried forward from step 3 from 2011 to 2012) - £800

Consideration of classic car rules

However, the normal calculation is not the end of the story. The conditions in section 147(2) are fulfilled:

  • the age of the car at 5 April 2021 is at least 15 years
  • its market value for the year is £17,500, which is more than £15,000
  • that value exceeds the amount carried forward from step 3 of section 121(1) (£800)

The car is therefore a classic car within section 147 (see EIM24400 onwards). Section 147(2) therefore specifies the following action:

  • for the amount carried forward from step 3 substitute the market value of the car for the year less any deductions under subsection (6), capital contributions to classic cars

Calculation using classic car rules: steps 1 to 4 for 2020 to 2021

Section 121 Item Total (£)
Step 3 Substitute the amount carried forward from step 3 under section 121(1) with the market value of the car less any capital contributions (£17,500 - £2,000). This figure is the interim sum (final figure at step 4). £15,500