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Income Tax (Earnings and Pensions) Act 2003

Section 148: Reduction of cash equivalent where car is shared

568.This section provides for a reduction of the cash equivalent of the benefit of a car where that car is shared by at least two employees who are chargeable to tax in respect of its availability. This section derives from paragraph 3 of ESC A71.

569.The concession was couched in terms of the apportionment of “a single car benefit charge”. This Act adopts a different approach by providing for a reduction of the relevant cash equivalent for each employee to whom the section applies. See item B of Change 27 in Annex 1.

570.This section, by virtue of the provisions in section 5, applies to office-holders as well as employees. See item D of Change 27 in Annex 1.

571.Subsection (1) states when the section applies. That is when two or more employees are chargeable to tax in respect of the provision of the car (of which they each have shared private use) by their employer. No reduction will be necessary if the car is shared between one such an employee and another employee who is not chargeable in respect of the provision of the car. That is because there will be only one cash equivalent arising from the provision of the car.

572.Converting the concession to legislation has produced a subtle change to how section 218 of this Act (which determines whether an employee is lower-paid) will apply, compared with how the source legislation in section 167(2) of ICTA worked with the concession. See item C of Change 27 in Annex 1.

573.Subsection (2) provides for the reduction of each employee’s cash equivalent of the car benefit, initially calculated ignoring the fact that the car is shared, on a just and reasonable basis. See item B in Change 27 in Annex 1.

574.Subsection (3) modifies how subsection (2) is to be interpreted.

575.Subsection (4) extends the section to cover private use of a car by a member of the employee’s family or household.

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