A car benefit charge is incurred when a car is made available to an employee by reason of employment and is available for private use. When a company car is provided to a disabled employee, a car benefit charge would normally arise under S120 ITEPA 2003 due to the conditions in S114 ITEPA 2003 being met.
However, an exemption is available in specific circumstances under S247 ITEPA 2003. The three conditions that all need to be met for a disabled employee to be totally exempt from any car benefit or car fuel benefit are as follows:
- That the car being provided has been adapted for the employee’s needs or the car provided is an automatic where the employee’s disability prevents them from driving any other car.
- That the car being provided is available only for the employee’s business travel, home to work travel or travel for training within one of the training exemption provisions under sections 250, 255 and 311 of ITEPA 2003.
- That there is no other private use of the car.
If any of the above conditions are not met, then the exemption cannot be used and both car and fuel benefit would apply. However, the standard car benefit rules are adapted in various ways for disabled drivers. Which adaptations that can be used when calculating the car benefit charge depend on whether the driver has a disabled person’s badge or not.
If the driver has a disabled person’s badge, then the following can be considered.
- Any equipment included in the car that enables the disabled employee to use the car is disregarded when calculating the cost of accessories. See S125(2)c and S172 ITEPA 2003.
- The CO2 emissions of the equivalent manual car can be used in the benefit calculation if these are lower than those of the automatic they actually drive. See S138 ITEPA 2003.
- The list (or where relevant) notional price of the equivalent manual car can be used in the benefit calculation if this is lower than the price of the automatic they actually drive. See S124A ITEPA 2003.
If the driver does not have a disabled person’s badge, then only the following can be considered.
- Any equipment designed solely for use by a chronically sick or disabled person is disregarded when calculating the cost of accessories. See S125(2)c and S172 ITEPA 2003.
The exemption from car benefit as detailed above and in S247 ITEPA 2003 can still be considered if the driver does not hold a disabled person’s badge as long as all conditions within that exemption are met.
HMRC’s guidance is at EIM23650 and EIM23660.
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