What if an employee has a rental car whilst theirs is off the road, or waiting for delivery of a new car?

Modified on Fri, 26 Jun at 2:27 PM

The short answer is that they are treated as company cars in Section F.

As cars (and vans) have special benefit treatment applied for P11D reporting, rental cars still need to be allocated to employee as a company car under Section F.

There is a temptation to put them in Section L (Assets placed at disposal of employee), but HMRC specifically state that cars should not be entered in Section L (with the exception of Blue Light vehicles). In booklet 480, the description of Section L (Assets placed at disposal of employee) states "As indicated in chapter 4 paragraph 4.3 different rules apply to mobile phones, vans and cars. Chapter 4 paragraph 4.3 says "the use of any asset given by the employer or another person acting on the employer’s behalf, for example, the use of a motorcycle, an aircraft or yacht, or of furniture or a TV set – the way in which the benefit from the use of such an asset is valued is described in chapter 6, paragraph 6.7 except for cars which are considered in chapters 11 to 13, vans which are considered in chapter 14 and mobile phones which are considered in chapter 22".

There are links to Booklet 480 below

It is sometimes a challenge to get the necessary data for a hire car for Section F (like list prices, CO2 and range), so as long as the replacement car is not ‘materially better’ than the normal car/incoming car, you would be able to create a 'notional car' and allocate that to the employee for the loan period. However, it would be strongly recommended that you keep records of the car should HMRC require confirmation that it is not 'materially better'.

Should you know the car is 'materially better', we would advise trying to get accurate vehicle information.