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These examples illustrates the guidance at EIM24365.

Example 1

The employer purchases a car for 拢20,000 to which the employee contributes 拢4,000. The car is sold after two years for 拢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. The repayment of 拢2,400 (拢4,000 x 12/20) is not chargeable to tax as employment income.

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

Note that it makes no difference whether or not the employee acquires part ownership. The treatment is the same in both cases because part ownership is not mentioned in the legislation. The 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 拢3,000 to the employee when the car is resold. The employee鈥檚 contribution is 拢4,000 less the 拢3,000 they are guaranteed to recover when the car is sold, i.e. 拢1,000.

The 拢3,000 is merely a loan, not a capital contribution.

The amount carried forward from Step 3 for car benefit purposes during the two years is 拢19,000.