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Equipment added to a car, also known as ‘extras’, e.g. a sunroof. Certain types of equipment are excluded from the definition, including mobile phones and security enhancements.

Advisory Fuel Rates (AFR)

HMRC published guidelines on fuel only mileage rates for company cars, to be used where employers reimburse employees for business travel or where employees are required to repay the cost of fuel used for private travel to avoid the fuel benefit charge.

Alternative Fuel Vehicle

A vehicle that runs on something other than purely petrol or diesel, including BEVs, PHEVs, FCEVs and HEVs.

Annual contributions

The amount an employee is required to pay as a condition of a car being available for private use. This will be deducted from the taxable benefit for the year in which the payment is made (often referred to as contributions for private use).

These contributions are not capital contributions which are treated differently for income tax purposes.

Apprentice Upper Secondary Threshold (AUST)

The earnings above which an employer must begin to pay secondary Class 1 NIC for apprentices aged under 25.

Approved Mileage Allowance Payment (AMAP)

The maximum Mileage Allowance Payment that is exempt from income tax.

Battery Electric Vehicle (BEV)

A car that runs purely on electric power, stored in an on-board battery that is plugged in to recharge.

Blocked car (VAT)

A car regarded as being available for private use and on which input VAT recovery is blocked in whole or part.

Business travel

Any journey which the employee is necessarily obliged to undertake in the performance of his duties.

Capital allowances

When a business purchases a car or van, corporation tax relief is calculated by a system known as capital allowances. The amount of the allowance and the timing of its receipt depend on the CO₂ emissions of the car or van.

Capital contribution

A capital sum an employee contributes towards the cost of a car or any qualifying accessory. When calculating the income tax due on the benefit in kind, a contribution, up to a maximum of £5,000, can be deducted from the list price for the year in which the capital sum is contributed and each subsequent year that the employee is assessed on the benefit in kind for that car.


A motor vehicle designed to carry a small number of people. For tax purposes a car may be defined differently depending upon the tax concerned.

Car benefit charge

The cash equivalent of the benefit of a company car, being the amount on which an employee will be charged income tax.

Car for capital allowances purposes

A car is any mechanically propelled road vehicle unless it is:-

  • a motor cycle or constructed in such a way that it is primarily suited for transporting goods or burden of any description; or
  • of a type not commonly used or suitable for use as a private vehicle.

Car for VAT purposes

Any motor vehicle of a kind normally used on public roads which has three or more wheels and:

  • is constructed or adapted solely or mainly for the carriage of passengers; or
  • has to the rear of the driver’s seat, roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows.


Carbon dioxide. The level of CO₂ emitted is used in the calculation of the car and fuel benefit charges.


Any travel between a permanent workplace and an employee’s home, or any other place which is not a workplace. This cannot be regarded as business travel.

Company car

A mechanically propelled road vehicle which is not:

  • a goods vehicle, which means a vehicle constructed primarily for the conveyance of goods or burden of any kind;
  • a motorcycle or invalid carriage; or
  • a vehicle of a type not commonly used as a private vehicle and unsuitable to be used as such.

Company van

A mechanically propelled road vehicle which is:

  • of a construction primarily suited for the conveyance of goods or burden; and
  • is designed or adapted to have a maximum weight not exceeding 3,500kg when in normal use and travelling on a road laden.

Corporation tax

A tax on the taxable profits of limited companies and other organisations including clubs, societies, associations, co-operatives and charities. Taxable profits include:

  • trading and investment profits (excluding dividends); and
  • capital gains.

Earnings threshold (NIC)

Employees and employers only become liable to pay Class 1 NIC once the Earnings Threshold is reached.

Earnings between the Lower Earnings Limit and the Earnings Threshold count towards an employee's entitlement to certain state benefits, including the earnings related element of the state pension, but no Class 1 NIC is due on these earnings as the rate is set at 0%.

Effective rental

The rental payable for a car provided under a contract hire agreement plus any blocked VAT.

Electric Vehicle (EV)

A catch-all term for BEVs and PHEVs but is often used to refer to just BEVs.

Excepted car (VAT)

A car which:-

  • will be used exclusively for the purposes of the business and is not available for any private use;
  • is a stock-in-trade car held for sale within 1 year by a motor manufacturer or dealer; or
  • is intended to be used primarily as a taxi, driving-instruction car or self-drive (that is daily rental) car.

First year allowance

This is a 100% capital allowance available to businesses in the year they purchase a zero emission car. It is not available to businesses that buy cars to lease.

Freeport Upper Secondary Threshold (FUST)

The earnings above which an employer must begin to pay secondary Class 1 NIC for those employed within a Freeport.

Fuel benefit charge

The cash equivalent of the benefit of free (or subsidised) private fuel provided to a company car driver, being the amount on which an employee will be charged income tax.

Fuel Cell Electric Vehicle (FCEV)

A pure electric vehicle with a hydrogen fuel cell that powers the electric motor.

Fuel duty

An excise tax imposed on the sale of fuel intended for transportation, such as petrol or diesel.

Fuel scale charge

The rates used for taxing the private use of road fuel for businesses that recover input VAT on the cost of fuel used for private motoring.

Health and Social Care Levy (HSCL)

A levy applied from 6 April 2022 to generate additional funding of £12 billion a year for the NHS and social care across the UK.

In 2022/23 the levy was temporarily added to the rates of NIC on the basis that from 2023/24 onwards it would be applied as a separate charge with NIC reverting to the 2021/22 rates. However, further to announcements made as part of the Growth Plan 2022 the levy has been abolished and the temporarily increased rates of NIC reduced with effect from 6 November 2022.

Heavy goods vehicle

A mechanically propelled road vehicle constructed primarily for the conveyance of goods or burden and designed or adapted to have a normal, maximum weight exceeding 3,500kg when in normal use and travelling fully loaded.

Hybrid Electric Vehicle (HEV)

A car capable of being propelled by two or more power sources, usually comprising an internal combustion engine and a battery powered electric motor. Typically, the term refers to what are commonly known as self-charging hybrids; these are petrol or diesel cars with a small battery, charged through regenerative braking, that generates electrical power and works in tandem with the combustion engine to help lower emissions.

Income tax

A tax on income, including:

  • earnings from employment or self-employment;
  • most pension income;
  • interest on most savings;
  • income from shares (dividends);
  • rental income;
  • income paid by a trust; and
  • certain non-cash benefits provided by employers, such as company cars, medical insurance or interest free loans.

Initial extra accessory

A non-standard accessory which is available with a car when it is first made available to an employee, including for example a tow-bar.

Internal Combustion Engine (ICE)

The engine of a traditional diesel or petrol car.

Later accessory

An accessory which was not available with a car when it was first made available to an employee but is added later. For income tax and NIC purposes, a later accessory is only taken into account if its list price is at least £100.


An agreement where the customer pays for the use of goods but does not own them.

Lease rental restriction

Corporation tax relief is reduced by 15% on the effective rental of a car with CO₂ emissions exceeding 500 g/km in 2022/23.


The customer in a lease agreement, that is the person to whom a lease is granted.


The owner of the goods in a lease agreement, that is the person who grants a lease.

List price

Commonly referred to as the ‘P11D value’, this is the published price of a car if sold singly in a retail sale in the open market in the UK on the day before the date of the car’s first registration.

It includes standard accessories, VAT and other relevant taxes and delivery charges, but excludes the first registration fee and VED.

Lower Earnings Limit (NIC)

Linked to the basic state pension this is the threshold beyond which earnings count towards an employee’s pension entitlement. However, NIC is not due until earnings exceed the Earnings Threshold.

Married couple’s allowance

An additional tax-free allowance available to married taxpayers or those in a civil partnership. An age related allowance is available to those born before 6 April 1935 and a transferable allowance is available to other taxpayers.

Mileage Allowance Payment

A payment from an employer to an employee who undertakes business mileage in his own car. The payment is designed to cover all the costs of owning and running the car, including depreciation and any interest paid on a loan to buy the car — see Approved Mileage Allowance Payments for MAPs that may be paid tax free.

Mileage Allowance Relief

The income tax relief available to an employee who uses his own vehicle for business purposes but is paid less than the Approved Mileage Allowance Payment for business travel.

Motor cycle

A mechanically propelled vehicle, not being an invalid carriage, with less than 4 wheels and the weight of which unladen does not exceed 410 kilograms.

National Insurance Contributions (NIC)

A social security contribution calculated by reference to earnings from an employment or office, or the profits of an unincorporated business.

New European Driving Cycle (NEDC)

Developed in the 1980s to measure CO₂ emissions and fuel consumption, the New European Driving Cycle was replaced by the WLTP testing regime in September 2017, but NEDC figures will continue to be used for tax purposes for CO₂ emissions and zero emission range for cars registered before April 2020.

Optional Remuneration Arrangement

An arrangement whereby an employee:

  • sacrifices salary in return for a taxable benefit, such as a company car; or
  • is offered the choice between a taxable benefit, such as a company car, and a cash alternative.

The employee will pay income tax on whichever is the greater of the taxable benefit and the salary sacrificed/cash alternative.


The statutory form used each year by employers to report the provision of taxable benefits to directors and employees. Form P11D must be submitted to HMRC, and provided to employees, by 6 July following the end of the tax year to which it relates

P11D value

A term commonly used instead of list price because the list price of a company car must be entered on form P11D before submission to HMRC.

Passenger payments

Payments paid to employees travelling on a business journey because they carry other employees for whom the journey is also business travel.

Personal allowance

The amount of taxable income which most UK residents are allowed to earn or receive each year tax-free. The amount of the personal allowance depends on the taxpayer's age and total income for the tax year.

Plug-in Hybrid Electric Vehicle (PHEV)

A vehicle with a combination of a battery, which must be plugged in to be recharged, and a traditional internal combustion engine, which is able to drive in either pure electric mode or pure fuel mode.

Pool car

For income tax purposes, a car owned by a business and in respect of which all the following conditions are satisfied:

  • it is available to, and actually used by, more than one employee;
  • it is made available, in the case of each of those employees, by reason of their employment;
  • it is not ordinarily used by one of them to the exclusion of the others;
  • any private use by an employee is merely incidental to its business use; and
  • it is not normally kept overnight on or near the residence of any of the employees unless it is kept on premises occupied by the provider of the car.


When a business buys its vehicles outright or uses a finance agreement that eventually gives title to the business, that is deferred purchase.

Qualifying accessory

An accessory made available by reason of the employee’s employment which is attached to the car and made available for use with it, without ownership being transferred to the employee, including for instance a stereo or DAB radio.

Qualifying amount (NIC)

The maximum Relevant Motoring Expense that is exempt from NIC.

Qualifying car (VAT)

A car obtained by a company or individual who intends to use it exclusively for business purposes and which has not therefore been subject to the full input tax blockage; that is, the business has recovered, in full, the input VAT on purchase.


Term used to describe how far a BEV can travel before needing to be recharged. May also be used to describe the distance a PHEV could travel under electric power alone (before relying on ICE technology).

Range Extended Electric Vehicle (REx)

An EV that has only an electric drivetrain, but a small petrol generator to charge the battery for longer trips when the electric range is depleted.

Relevant Motoring Expenses (NIC)

Payments from an employer to an employee who uses his own car for business purposes such as:

  • Mileage Allowance Payments;
  • regular lump sum payments;
  • one-off lump sum payments;
  • an employee’s use of a company credit or fuel card; or
  • an employer meeting an employee’s pecuniary liability.

Replacement accessory

An accessory which replaces another qualifying accessory (“the old accessory”) and is of the same kind as the old accessory.

Retail price

Although not precisely defined in tax legislation it is regarded as being the price that an ordinary member of the public might pay for a car. This will include VAT, even if this has been recovered by the taxpayer in question or the leasing company, but no account should be taken of any bulk discounts or special deals that a particular buyer might obtain

In April 2000, HMRC published a bulletin stating that if the lessee knows the actual price paid by the lessor for the car when new, this can be used as the retail price when new.

Showroom tax

The colloquial term used to describe the Vehicle Excise Duty due when a new car is first registered, which can be higher than the standard VED.


A 130% first year allowance available to companies that purchase qualifying plant and machinery, that includes vans and electric chargepoint equipment, between 1 April 2021 and 31 March 2023.

Upper Earnings Limit (NIC)

Linked to the income tax threshold at which an employee’s earnings become liable to higher-rate tax, this is the amount above which an employee pays Class 1 NIC at a rate of just 2%.

Upper Secondary Threshold (UST)

The earnings above which an employer must begin to pay secondary Class 1 NIC for employees aged under 21.


A motor vehicle designed primarily for transporting goods. For tax purposes a van may be defined differently depending upon the tax concerned.

Van benefit charge

The cash equivalent of the benefit of a company van, being the amount on which an employee will be charged income tax.

Van for capital allowances purposes

A mechanically propelled road vehicle of a construction primarily suited for the conveyance of goods or burden.

Van for VAT purposes

For VAT purposes a commercial vehicle (that is a van or a heavy goods vehicle) is a mechanically propelled road vehicle which is:

  • of a construction primarily suited for the conveyance of goods or burden; and
  • has an unladen weight of 3 tonnes or a payload of 1 tonne or more.

Vehicle Excise Duty

Also referred to as road fund licence or road tax this is an excise duty which enables motor vehicles to be legally used on U.K. roads.

Veterans Upper Secondary Threshold (VUST)

The earnings above which an employer must begin to pay secondary Class 1 NIC in respect of former members of the armed services within the first 12 months of civilian employment.

Worldwide Harmonised Light Vehicle Test Procedure (WLTP)

Effective from September 2017, the Worldwide harmonised Light vehicles Test Procedure replaced the NEDC because it gives a better measure of a car’s on-road performance. For tax purposes WLTP will be used as the measure of CO₂ emissions and zero emission range for cars registered from 6 April 2020.

Writing down allowance

The annual rate at which capital allowances can be claimed. This rate is reduced or extended if the chargeable period is shorter or longer than one year.

The writing down allowance is the rate which applies in the absence of any initial or first year allowance. For plant and machinery, such as cars and vans a reducing balance basis is used to calculate the capital allowances available each year.

Total writing down allowances may not exceed the actual depreciation (that is purchase price less sale proceeds).