Income Tax (Earnings and Pensions) Act 2003 section 145

Modification of provisions where car temporarily replaced

Section 145 deals with how the taxable car benefit is calculated when an employee's usual company car is temporarily unavailable and a replacement car is provided for a short period.

• When an employee's normal company car is unavailable for less than 30 days and a replacement car is provided, special rules may simplify the tax calculation so the employee is not taxed on two cars simultaneously.
• The replacement car must either not be materially better than the normal car, or must not have been provided mainly to give the employee a superior vehicle.
• If the conditions are met, the replacement car is treated as unavailable for benefit purposes during the replacement period, and any payments the employee makes for private use carry on as though the normal car had never been swapped out.
• A replacement car is "materially better" if it is significantly higher in quality or if the calculated cash equivalent benefit figure for the replacement car is significantly higher than that of the normal car.