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Sections 121(1) and 125 to 132 ITEPA 2002

When working through this example you may find it useful to refer to:

• the method statement in section 121(1) ITEPA 2003, see EIM24015 (this page illustrates steps 1 to 4)
• the flowchart for steps 1 to 4 at EIM24055

Example

In April 2002, an employee is supplied with a car with list price of 拢18,590. It鈥檚 supplied with metallic paint (拢250) and a CD multichanger (拢450, for which the employee pays) as factory-fitted options (i.e. priced by the car鈥檚 manufacturer). Before registering the car, the dealer puts on a paint-protecting finish (拢95). On 6 April 2003, the car is converted to run on road fuel gas (拢1,250). The employee contributes 拢250 to this. On 6 June 2003, roof rails costing 拢95 (including tax and fitting) are added.

Calculation: steps 1 to 4 for the tax year 2003 to 2004

Section 121

听	Item	Price of item (拢)	Running total (拢)
Step 1	List price including standard accessories, VAT, number plates, delivery	18,590	18,590
Step 2	Initial extra accessory - metallic paint	250	听
听	Initial extra accessory - CD multichanger	450	听
听	Initial extra accessory - paint-protecting finish	95	19,385
听	Later accessory - conversion to run on road fuel gas (note 1)	Nil	听
听	Later accessory - roof rails (note 2)	Nil	19,385
Step 3	Capital contribution towards CD multichanger	450	听
听	Capital contribution towards road fuel gas conversion	Nil	18,935
Step 4	Interim sum (price of the car) - step 4 is omitted from 2011 to 2012 onwards, so the interim sum is then the amount carried forward from step 3	听	18,935

Notes

1. See EIM24280.
2. The price of the roof rails is not added because the price is below the 拢100 de minimis limit, so they never count as later accessories at all (see EIM24215).
3. The capital contribution towards the road fuel gas conversion is not deducted because the cost of the conversion is not taken into account in calculating the cash equivalent of the benefit of the car (see EIM24350 onwards).