Income Tax (Earnings and Pensions) Act 2003 section 121

Method of calculating the cash equivalent of the benefit of a car

Section 121 sets out the step-by-step method for calculating the taxable cash equivalent of a company car benefit for a given tax year.

• The calculation starts with the car's list price plus accessories, less any capital contributions by the employee, to arrive at an "interim sum"
• The interim sum is then multiplied by an "appropriate percentage" (based on the car's CO₂ emissions and fuel type) to produce a benefit figure
• Deductions are made for periods when the car was unavailable and for any payments the employee makes for private use, giving the final cash equivalent
• Modified calculations apply for cars running on road fuel gas, classic cars aged 15 years or more, and shared cars