Income Tax (Earnings and Pensions) Act 2003 section 132A

Capital contributions by employee: optional remuneration arrangements

Section 132A deals with how an employee's capital contribution towards the cost of a company car or its accessories reduces the taxable benefit where the car is provided under an optional remuneration arrangement (commonly known as a salary sacrifice scheme).

• Where an employee makes a capital contribution towards a company car or qualifying accessories under an optional remuneration arrangement, a deduction is given in the tax year the contribution is made and in every subsequent year the employee is taxed on that car
• The annual deduction is calculated by multiplying the capped contribution amount by the car's appropriate percentage (its CO₂-based benefit-in-kind percentage), and then adjusting for the proportion of the year the car was actually available to the employee
• The capped amount is the lower of the total capital sums the employee has contributed in the current and all earlier years towards the car and qualifying accessories, or £5,000
• The car is treated as unavailable on days before it was first available to the employee, after it was last available, or during any continuous period of 30 days or more when it was not available