Income Tax (Earnings and Pensions) Act 2003 section 120

Benefit of car treated as earnings

Section 120 establishes that the cash equivalent of a company car benefit is treated as taxable earnings from employment.

• Where the company car rules apply for a tax year, the calculated cash equivalent of the car benefit counts as employment earnings for that year
• The employee is treated as chargeable to tax on the car even if the cash equivalent works out at nil
• All references in the Act to car benefit being treated as earnings include situations where the cash equivalent is nil
• The section is subject to separate rules under section 120A where the car is provided through an optional remuneration arrangement (salary sacrifice)