When a car is made available to an employee and is available for private use, the employer must submit form P46 (Car) available from the HMRC website
The provision of a car which is ‘available’ to an employee (whether used by him or not), represents a taxable benefit. Car benefits vary according to the size and fuel efficiency of the car; they range from 10% for a car with emissions of 120gm/km to 35% for a petrol car with CO2 emissions of 235gm/km or a diesel car with CO2 emissions of 220gm/km. Details of changes from 2011-12 are available on the HMRC website
The percentage is applied to: [list price of car + value of any optional extras] X percentage based on the car’s CO2 emissions.
Note: it is the list price that is used and not the actual price, although there is an overall limit of £80,000 on the price of the car, either list or optional price.
An exception to this is the case of a classic car; market value is substituted where the market value is at least £15,000 and exceeds the price.
If a car is unavailable for any part of the year, the benefit charge is reduced accordingly. Any contribution by the employee will also reduce the chargeable amount.
An employee was provided with a car by his employer, but was required to pay for insuring the car. He was assessed on car benefit and appealed, contending that the insurance payments should be deducted in computing the car benefit. The court rejected this and upheld the assessment, holding that the only deductions available would be for the car itself rather than insurance. [CIR v Quigley CS 1997, 67 TC 535].
The appropriate percentage for zero emission cars reverts to 9%. The special rules for cars with CO2 emissions not exceeding 75g/km will be abolished.