»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýappse examples illustrates the guidance at EIM24365.

Example 1

»Ê¹ÚÌåÓýapp employer purchases a car for £20,000 to which the employee contributes £4,000. »Ê¹ÚÌåÓýapp car is sold after two years for £12,000. Under the terms of the agreement the employee is entitled to a repayment of that proportion of his or her original contribution that the sale proceeds bear to the original cost of the car. »Ê¹ÚÌåÓýapp repayment of £2,400 (£4,000 x 12/20) is not chargeable to tax as employment income.

»Ê¹ÚÌåÓýapp amount carried forward for car benefit purposes during the two years after the deduction for capital contributions at Step 3 is £16,000.

Note that it makes no difference whether or not the employee acquires part ownership. »Ê¹ÚÌåÓýapp treatment is the same in both cases because part ownership is not mentioned in the legislation. »Ê¹ÚÌåÓýapp right to a repayment comes from the contract and is not affected by any part ownership the employee may have acquired.

Example 2

In the situation above, the employer agrees to reply £3,000 to the employee when the car is resold. »Ê¹ÚÌåÓýapp employee’s contribution is £4,000 less the £3,000 they are guaranteed to recover when the car is sold, i.e. £1,000.

»Ê¹ÚÌåÓýapp £3,000 is merely a loan, not a capital contribution.

»Ê¹ÚÌåÓýapp amount carried forward from Step 3 for car benefit purposes during the two years is £19,000.