Clause 135: Car with a CO2 emissions figure: pre-October 1999 registration

503.     This clause gives a rule to determine the CO2 emissions figure for certain cars first registered after 31 December 1997 and before 1 October 1999. The clause derives from parts of paragraph 3(1) and (2) of Schedule 6 to ICTA.

504.     Subsections (1) and (2) define a CO2 emissions figure by reference to the appropriate European or United Kingdom certification schemes that were in place at the time of a first registration that occurred on or after 1 January 1998 and before 1 October 1999.

505.     Subsection (3) makes this clause subject to a further rule that applies to the provision of an automatic car for an employee who is disabled.

Clause 136: Car with a CO2 emissions figure: post-September 1999 registration

506.     This clause gives a rule to determine the CO2 emissions figure for certain cars first registered after 30 September 1999. The clause derives from parts of paragraph 3(1) and (2) of Schedule 6 to ICTA.

507.     Subsections (1) and (2) define the CO2 emissions figure by reference to the appropriate European or United Kingdom certification schemes that were in place at the time of a first registration on or after 1 October 1999.

508.     Subsection (3) makes this clause subject to further rules that apply to the provision of a car capable of running on more than one type of fuel or of an automatic car for an employee who is disabled.

Clause 137: Car with a CO2 emissions figure: bi-fuel cars

509.     This clause gives a CO2 emissions figure for bi-fuel cars (cars capable of running on more than one type of fuel) first registered after 31 December 1999. Such cars will have at least two CO2 emissions figures. The clause derives from paragraph 5 of Schedule 6 to ICTA.

510.     Subsection (1) refers to the CO2 emissions figures of a bi-fuel car by reference to the appropriate European or United Kingdom certification schemes that were in place at the time of a first registration after 31 December 1999.

511.     Subsection (2) determines which figure must be used.

512.     Subsection (3) makes this clause subject to a further rule that applies to the provision of an automatic car for an employee who is disabled.

Clause 138: Car with a CO2 emissions figure: automatic car for a disabled employee

513.     This clause gives a special rule for identifying the CO2 emissions figure for an automatic car provided for a disabled employee. The clause derives from paragraph 5A(1), (2), (3) and (4) of Schedule 6 to ICTA.

514.     The CO2 emissions figure for an automatic car is generally higher than for its manual equivalent. So as not to penalise a disabled employee whose disablement means that the car he or she drives must have an automatic gearbox, this clause provides that the CO2 emissions figure to be used is that of the nearest equivalent manual version of the car.

515.     Subsection (1) states when the clause applies. This subsection refers to the employee as "E" to avoid repeated use of the word "employee".

516.     Subsection (2) provides for the substitution of the CO2 emissions figure of the manual equivalent of the automatic car if it is lower.

517.     Subsection (3) defines "equivalent manual car".

518.     Subsection (4) defines a car with automatic transmission. This subsection incorporates a suggestion made during the process of consultation leading up to this Bill. The definition turns on the central idea that an automatic car is a car that does not have a clutch needing to be operated by some physical action by the driver.

519.     Subsection (5) avoids the use of the phrase "the employee's employment". This provision contrasts with clause 116(1) in that it only applies to a car made available to the employee personally and not to members of the employee's family or household.

Clause 139: Car with a CO2 emissions figure: the appropriate percentage

520.     This clause identifies the "appropriate percentage" to be used at Step 6 in clause 121(1) to calculate the cash equivalent for a car that has a CO2 emissions figure. The clause derives from paragraphs 3(3), (4) and (5) and 4(1) and (3) of Schedule 6 to ICTA.

521.     Subsection (1) states the starting point for arriving at the appropriate percentage, which is the car's CO2 emissions figure.

522.     Subsection (2) gives the appropriate percentage if the car's CO2 emissions figure is no higher than "the lower threshold". This is the "basic percentage", initially set at 15%.

523.     Subsection (3) gives the appropriate percentage if the car's CO2 emissions figure is higher than "the lower threshold". The basic percentage is increased by one percentage point for each additional (full) five grams per kilometre of CO2 emitted, up to a maximum appropriate percentage of 35%. The reference in paragraph 3(4) to "the basic percentage increased by 1%" is rewritten as "the basic percentage increased by one percentage point". That makes the intention of the legislation clearer, as it avoids any suggestion that the "minimum percentage" must be increased by 1% of itself (to 15.15%).

524.     Subsection (4) states what is "the lower threshold" for different tax years.

525.     Subsection (5) is incidental to subsection (3) and provides a rule to calculate the appropriate percentage if the car's CO2 emissions figure is higher than "the lower threshold". It provides for the rounding down of the car's CO2 emissions figure to the nearest multiple of five. Its effect is that the basic percentage is increased under subsection (3)(a) by one percentage point only for every additional full five grams per kilometre of CO2 emitted.

526.     Subsection (6) makes the clause subject to other provisions relating to diesel cars and to Treasury powers to amend the amounts involved.

Clause 140: Car without a CO2 emissions figure: the appropriate percentage

527.     This clause gives the "appropriate percentage" to be used at Step 6 in clause 121(1) to calculate the cash equivalent for a car first registered after 31 December 1997 that does not, for whatever reason, have a CO2 emissions figure. The clause derives from paragraphs 5C(2), (3) and (4) and 5G of Schedule 6 to ICTA.

528.     Subsection (1) applies the clause to determine the appropriate percentage for cars without a CO2 emissions figure. They include, for example, electrically propelled cars and cars with an internal combustion engine that does not have one or more reciprocating piston.

529.     Subsection (2) applies to cars with an internal combustion engine that does have one or more reciprocating piston. The appropriate percentage increases with engine size.

530.     Subsection (3) gives the appropriate percentage for cars not within subsection (2).

531.     Subsection (4) defines an "electrically propelled vehicle" for the purposes of this clause.

532.     Subsection (5) makes the clause subject to other provisions relating to diesel cars and to any regulations made under Treasury powers to amend the amounts involved.

Clause 141: Diesel cars: the appropriate percentage

533.     This clause gives the "appropriate percentage" to be used at Step 6 in clause 121(1) to calculate the cash equivalent for a diesel car. The clause derives from paragraph 5D(1), (2) and (4) of Schedule 6 to ICTA.

534.     Subsection (1) states to which cars the clause applies, namely diesel cars first registered after 31 December 1997.

535.     Subsection (2) uses a method statement to set out the steps in the calculation of the appropriate percentage.

536.     Subsection (3) defines "diesel car" for the purposes of this clause.

537.     Subsection (4) makes the clause subject to any regulations made under Treasury powers to amend the amounts involved.

Clause 142: Car first registered before 1st January 1998: the appropriate percentage

538.     This clause gives the "appropriate percentage" to be used at Step 6 in clause 121(1) to calculate the cash equivalent for a car registered before 1 January 1998. Such cars are less likely to have a recognised CO2 emissions figure, so a different and consistent basis is used for all such cars. The clause derives from paragraphs 5F(1), (2) and (3) and 5G of Schedule 6 to ICTA.

539.     Subsection (1) states to which cars the clause applies, namely those first registered before 1 January 1998.

540.     Subsection (2) applies to cars with an internal combustion engine that has one or more reciprocating piston. The appropriate percentage increases with engine size. For cars driven by an internal combustion engine with one or more reciprocating piston the "appropriate percentage" is the same, irrespective of the fuel used.

541.     Subsection (3) gives the appropriate percentage for cars not within subsection (2).

542.     Subsection (4) defines an "electrically propelled vehicle" for the purposes of this clause.

Clause 143: Deduction for periods when car unavailable

543.     This clause quantifies a deduction that can be made at Step 7 of clause 121(1) in calculating the cash equivalent, because a car is not available at some time during the tax year. The clause derives from part of paragraph 6 and paragraph 9 of Schedule 6 to ICTA.

544.     Subsection (1) provides for the deduction.

545.     Subsection (2) defines the periods of non-availability. They cover the period from the beginning of the tax year involved to the date on which the car first became available and the period from the date when the car ceased permanently to be available to the end of the tax year. There can also be a period of temporary non-availability for one or more continuous periods of 30 days. Such a period can span two tax years ie the 30 days do not have to fall wholly within one tax year.

546.     Subsection (3) gives a formula to calculate the appropriate deduction.

547.     Subsection (4) makes this clause subject to a further provision that applies if the car is temporarily replaced.

Clause 144: Deduction for payments for private use

548.     This clause provides for a deduction to be made in calculating the cash equivalent at Step 8 of clause 121(1), to take account of the employee having paid for private use of the car. The clause derives from paragraph 7 of Schedule 6 to ICTA.

549.     Subsection (1) states when the clause applies. That is when, as a condition of the car being made available for private use, the employee is required to pay, and does pay, for that private use.

550.     The words "(whether by way of deduction from earnings or otherwise)" have been retained as they remove a potential area of doubt about whether a deduction from earnings can amount to a payment. The same approach is used in clauses 159(1)(a) and 165(1)(a).

551.     Subsections (2) and (3) provide for the deduction of the appropriate amount at Step 8 of the calculation in clause 121(1).

552.     Subsection (4) extends the clause to private use of a car by a member of the employee's family or household.

553.     Subsection (5) makes this clause subject to a further provision that applies if the car is temporarily replaced.

Clause 145: Modification of provisions where car temporarily replaced

554.     This clause modifies the effect of the two previous clauses if a car is temporarily replaced. The clause derives from the Income Tax (Replacement Cars) Regulations 1994 (SI 1994 No 778). Those Regulations were made under powers provided by paragraph 8 of Schedule 6 to ICTA. As there is no longer any reason to retain those powers, that paragraph has not been rewritten.

555.     Subsections (1) to (3) deal with the conditions to be met for the clause to apply. Condition A in subsection (2) relates to the quality of the replacement car as compared with the car it replaces. This Bill uses a slightly different form of wording from the source legislation. See Change 25 in Annex 1.

556.     Subsection (4) makes the necessary modifications to clauses 143 and 144 when this clause applies.

557.     Subsection (5) defines "materially better". The possible introduction of a numerical measure of improvement (a maximum percentage increase above the interim sum, for example) to remove the inherent uncertainty of "materially" was considered but rejected. That approach might produce "hard cases". It is better to retain the flexibility that a common sense interpretation of "materially" allows.

Clause 146: Cars that run on road fuel gas

558.     This clause provides for a deduction to be made from the price of the car at Step 1 of the calculation of the cash equivalent in clause 121(1) if the car has been manufactured to run on road fuel gas and is not a bi-fuel car. The deduction that can be made is the amount that is reasonably attributable to the car being manufactured to run on road fuel gas, rather than only on petrol. The clause derives from section 168AB(2) and (4) of ICTA.

559.     Subsection (1) states when the clause applies.

560.     Subsection (2) provides for the appropriate deduction from the price arrived at after Step 1 of the calculation in clause 121(1). This is a slight variation on the calculation used in the source legislation. See Change 26 in Annex 1.

Clause 147: Classic cars: 15 years of age or more

561.     This clause provides for modifications to the calculation of the cash equivalent of car benefit in clause 121(1) if the car is a classic car. The clause derives from section 168F(1) to (8) of ICTA.

562.     The clause heading emphasises that the provision applies to modern classics as well as vintage or veteran cars.

563.     Subsection (1) states when the clause applies by reference to the age and market value of the car. A car that is 15 or more years old, with a market value of more than £15,000 and in excess of the amount carried forward from Step 3 in clause 121(1) of the "normal" calculation will fall within the provision.

564.     Subsection (2) applies the modification provided for in this clause to the calculation in clause 121(1). This is the substitution of the market value (after adjustment for any capital contributions by the employee) of the car on the last day of the tax year involved (or the last day the car is available to the employee in that year, if earlier) for the amount arrived at after Step 3 under the normal calculation method.

565.     Subsections (3) and (4) define the market value of the car.

566.     Subsections (5) to (7) provide for a deduction (limited to £5,000 in any tax year) from the market value to reflect any capital contributions by the employee.

Clause 148: Reduction of cash equivalent where car is shared

567.     This clause 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 clause derives from paragraph 3 of ESC A71.

568.     The ESC was couched in terms of the apportionment of "a single car benefit charge". This Bill adopts a different approach by providing for a reduction of the relevant cash equivalent for each employee to whom the clause applies. See item B of Change 27 in Annex 1.

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

570.     Subsection (1) states when the clause 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.

571.     Converting the ESC to legislation has produced a subtle change to how clause 218 (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 ESC. See item C of Change 27 in Annex 1.

572.     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.

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

574.     Subsection (4) extends the clause to cover private use of a car by a member of the employee's family or household.

Clause 149: Benefit of car fuel treated as earnings

575.     This clause brings into charge, as an employee's earnings, the cash equivalent of the benefit arising from the provision of fuel for a car to which clause 120 applies. The clause derives from section 158(1), (9) and part of (3) of ICTA.

576.     Subsection (1) states the main principle, which is that any fuel benefit associated with a car benefit is taxed as earnings. The rewrite of the source legislation has clarified the timing of the charge. See Note 7 in Annex 2.

577.     Subsection (1)(b) now refers to "that person", rather than "the employee" to avoid a repetitive reference to "the employee" that might have been regarded as indicating that the car must have been made available by reason of the same employment as that providing the car fuel. There is no such stipulation on the face of section 158(1) of ICTA.

578.     Subsection (2) applies the provisions that determine how the cash equivalent of the fuel benefit is calculated.

579.     Subsection (3) gives examples of what constitutes the provision of fuel. The definitions of "non-cash voucher" and "credit-token" used in subsection (3)(b) and (3)(c) are listed in Schedule 1.

580.     Subsection (4) excludes the provision of electrical energy from the benefit charge.

Clause 150: Car fuel: calculating the cash equivalent

581.     This clause defines the cash equivalent of the benefit of the provision of car fuel. The clause derives from section 158(2) of ICTA.

582.     Subsection (1) gives the basis of calculation, which is to take the "appropriate percentage" of £14,400.

583.     Subsection (2) states the meaning of "appropriate percentage" in this clause. That is the same percentage as is used to calculate the cash equivalent of the car for which the fuel is provided.

584.     Subsection (3) gives signposts to three clauses that modify the cash equivalent in particular circumstances.

Clause 151: Car fuel: nil cash equivalent

585.     This clause prevents a benefits charge when there is no private use of fuel or the employee pays for the private use. The clause derives from section 158(6) of ICTA.

586.     Subsection (1) provides that the cash equivalent will be nil if either of the conditions defined in subsections (2) or (3) is met.

587.     Subsection (2) applies to cases where the employee is required to pay for, and does pay for, all fuel for private use.

588.     Subsection (3) applies when fuel is provided only for business travel.

Clause 152: Car fuel: proportionate reduction of cash equivalent

589.     This clause provides for a proportionate reduction in the cash equivalent of the fuel benefit for particular circumstances, which may apply during part of a tax year. This clause derives from section 158(5), (6A), (6B), and (8) of ICTA.

590.     Subsection (1) applies when the car for which the fuel is provided is unavailable.

591.     Subsection (2) covers circumstances where the fuel is not available for private use or its cost has to be and is reimbursed by the employee.

592.     Subsection (3) is to prevent unintended advantage being obtained from the legislation by repeated changes in the circumstances that apply to the provision of the fuel.

593.     Subsection (4) gives a formula to calculate the reduced cash equivalent. The formula uses "Y", defined as "the number of days in the tax year in question", instead of the fixed figure of "365" in the source legislation. That copes automatically with leap years. See item A of Change 28 in Annex 1.

Clause 153: Car fuel: reduction of cash equivalent

594.     This clause provides for a reduction of the cash equivalent of the fuel benefit in certain circumstances when a car is shared. The clause is new. It is an extension of the change referred to in paragraph 568. See item B of Change 27 in Annex 1.

Clause 154: Benefit of van treated as earnings

595.     This clause states the principle that the cash equivalent of the benefit arising from the provision of a van is treated as the employee's earnings from the employment. The clause reflects the approach in clause 120, the corresponding clause for cars. The clause derives from section 159AA(1) of ICTA. The rewrite of the source legislation has clarified the timing of the charge. See Note 7 in Annex 2.

Clause 155: Method of calculating the cash equivalent of the benefit of a van

596.     This clause states the principles involved in calculating the cash equivalent of the benefit of a van. The clause derives from paragraphs 1(1), 4(1) and 5(6) and (10) of Schedule 6A to ICTA.

597.     Subsection (1) states the starting point in the calculation. That is whether or not the van is shared at any time in the tax year.

598.     Subsection (2) identifies the provision that contains the basis of calculation that applies if the van was not a shared van, as defined in section 156, for any period in the tax year.

599.     Subsection (3) identifies the provision that contains the basis of calculation that applies if the van was a shared van, as defined in section 156, for the whole of the tax year.

600.     Subsection (4) applies when the van is shared for only part of the year. See item C of Note 17 in Annex 2 .

601.     Subsections (5) and (6) make it clear which vans are counted in the calculation of the value of shared availability under, respectively, the normal and alternative methods of calculation.

602.     Subsection (7) states the rule for calculating the total value of shared availability when an employee shares more than one van.

603.     Subsection (8) gives a signpost to a clause that imposes an overall limit on the cash equivalent of the benefit arising from the provision of a van or vans.

Clause 156: Meaning of "shared van"

604.     This clause defines the term "shared van". The clause derives from paragraph 4(2), (3), (4) and (5) of Schedule 6A to ICTA.

605.     Subsections (1) to (3) determine, for the purposes of clauses 155 to 165, whether a van is a "shared van". Subsection (3)(a) emphasises, by its reference to "different employees", that it denotes a group of employees that may vary over the period.

606.     Subsection (4) provides that if a van is available to only one employee for a period of 30 days or more the van will not count as a "shared van" for that period.

607.     Subsection (5) requires shared use for any part of a day to be counted as shared use for that day.