The Income Tax (Replacement Cars) Regulations 1994

Statutory Instruments

1994 No. 778

INCOME TAX

The Income Tax (Replacement Cars) Regulations 1994

Made

15th March 1994

Laid before the House of Commons

16th March 1994

Coming into force

6th April 1994

The Treasury, in exercise of the powers conferred on them by paragraph 8 of Schedule 6 to the Income and Corporation Taxes Act 1988(1), hereby make the following Regulations:

Citation and commencement

1.  These Regulations may be cited as the Income Tax (Replacement Cars) Regulations 1994 and shall come into force on 6th April 1994.

Interpretation

2.  In these Regulations unless the context otherwise requires—

“paragraph 8” means paragraph 8 of Schedule 6;

“replaced car” means a car normally available to the employee but which for a period of less than 30 days is not available to him;

“replacement car” means a car made available to the employee in order to replace the replaced car for the whole or part of the period during which the replaced car is not available to the employee;

“Schedule 6” means Schedule 6 to the Taxes Act;

“the Taxes Act” means the Income and Corporation Taxes Act 1988.

Modifications of Schedule 6 introductory

3.  Where the conditions specified in paragraphs (a) and (b) of paragraph 8 and the condition prescribed by regulation 4 below are fulfilled, Schedule 6 shall have effect in relation to the cars concerned subject to the modifications prescribed by regulations 5 and 6 below.

Prescribed condition in relation to replacement cars

4—(1) The prescribed condition is that—

(a) the replacement car is of similar quality to the replaced car, or

(b) the replacement car is not made available to the employee under an arrangement of which the main purpose or one of the main purposes is to provide the employee with the benefit of a car which is materially better than the replaced car.

(2) For the purposes of paragraph (1)(a) above the replacement car is of similar quality to the replaced car if it is neither materially better nor materially worse in quality than the replaced car.

(3) For the purposes of paragraph (1)(b) above the replacement car is materially better than the replaced car if—

(a) it is materially better in quality, or

(b) it has a materially higher price.

(4) For the purposes of paragraph (3)(b) above the price of a car shall be determined in accordance with the provisions contained in sections 168A to 168G of the Taxes Act(2).

Modifications of Schedule 6

5.  Paragraphs 2, 4 and 7 shall each be modified so as to provide in addition that the paragraph shall be applied as if the replacement had not been made and the replacement car were a continuation of the replaced car.

6.  Paragraph 9 shall be modified so as to provide in addition that, for the purposes of Schedule 6, the replacement car is also to be treated as unavailable for the period during which it replaces the replaced car.

Irvine Patnick

Tim Wood

Two of the Lords Commissioners of Her Majesty’s Treasury

15th March 1994

Explanatory Note

(This note is not part of the Regulations)

These Regulations are made by the Treasury under paragraph 8 of Schedule 6 to the Income and Corporation Taxes Act 1988 (“paragraph 8” and “Schedule 6” respectively), as substituted by paragraph 5 of Schedule 3 to the Finance Act 1993. Paragraph 8 provides that where a car (“the replaced car”) is normally available to an employee but for a period of less than 30 days is not available to him, another car (“the replacement car”) is made available to the employee to replace the replaced car for the whole or part of that period, and such other conditions as may be prescribed by the regulations are fulfilled, Schedule 6 shall have effect in relation to the cars concerned subject to such modifications as are prescribed by the regulations.

Regulation 4 of these Regulations prescribes a condition to be fulfilled in relation to the replacement car before Schedule 6 has effect in relation to the cars concerned.

Regulations 5 and 6 of these Regulations prescribe modifications of Schedule 6 which apply where the conditions specified in paragraph 8 are fulfilled. The modifications provide for the replacement car to be treated, for the purposes of Schdule 6, as a continuation of the replaced car, with the cash equivalent of the benefit of the replaced car being calculated accordingly; and for the replacement car to be treated as unavailable, with the consequence that the cash equivalent of the benefit of this car is reduced to nil during the period in which the replacement takes place.

(1)

1988 c. 1; Schedule 6 was substituted, with effect for the year 1994-95 and subsequent years of assessment, by paragraphs 5 and 7 of Schedule 3 to the Finance Act 1993 (c. 34).

(2)

Sections 168A to 168G were inserted, with effect for the year 1994-95 and subsequent years of assessment, by paragraphs 4 and 7 of Schedule 3 to the Finance Act 1993.