*** We need to emphasise that we are not tax advisers, and can only help with the use of the software. ***


That said, if an employee has made payments solely to get a better or upgraded car, that payment should probably be disregarded - as it is really only a payment the employee is making for getting a better car it should not attract a tax benefit.


If you look at this HMRC page this is covered in Example 5.


Example 5

Before the employee was provided with a new company car, the employer held discussions with the employee. The agreement that the employer and employee entered into stated that the employee could chose any car they wanted as a company car, but the employee had to make a financial contribution for some cars and if the employee wanted to use the car for private use she had to pay £150 per month (£1,800 in the tax year).


The employee chose a car where she had to pay an extra contribution of £175 per month (£2,100 in the tax year); she also decided that she wanted to use the car for private use the car for private mileage. She paid a total of £3,900 in the tax year.


Is this a private use payment? The £1,800 is specifically for being able to use the car for private use and no other reason, so it qualifies as a private use payment. However, the additional payment of £2,100 for the car she wanted is not a private use payment, as it is for the availability of a more expensive car.


The provisional sum is (£16,659 x 17%) is £2,832


The cash equivalent of the car benefit (£2,832 - £1,800) is £1,032


To reaffirm, we are not tax advisers, so obviously you can enter the data into the system as you see fit but you ought to seek tax advice on this matter.