Company car unavailable for part of the year

Company car benefit is reduced in proportion to the number of days in the tax year on which the car is unavailable, under section 143 of ITEPA 2003. A day only counts if it falls before the car was first available, after it was last available, or within an unbroken period of at least 30 days when the employee could not use it. A shorter gap gives no reduction at all.

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Where does the reduction fit in the calculation?

The cash equivalent of a company car is worked out in the steps set out in section 121(1) ITEPA. The list price and accessories, less capital contributions, give the interim sum; that is multiplied by the appropriate percentage for the car’s emissions. Step 7 then makes the deduction under section 143 for days when the car was unavailable, giving the provisional sum. Step 8 deducts any payments the employee makes for private use. The order is important: the unavailability reduction is applied before private use payments, and the reduction for a shared car (section 148) sits between the two. The full sequence is covered in company car benefit in kind.

The deduction is given by the formula U ÷ Y × A, where U is the number of unavailable days in the year, Y the number of days in the year and A the full year figure from step 6. The 2026 to 2027 tax year runs from 6 April 2026 to 5 April 2027, which is 365 days.

Which days count as unavailable?

Section 143(2) treats a car as unavailable on a day that:

falls before the first day on which the car is available to the employee;
falls after the last day on which the car is available to the employee; or
falls within a period of 30 days or more throughout which the car is not available to the employee.

The first two cover cars provided or withdrawn part way through the year and have no minimum. The third is the one that catches people out. The days must be consecutive, but they need not fall in the same tax year. HMRC’s example at EIM25105 is a car taken into a garage on 31 March and collected on 1 May: the period qualifies, giving 5 unavailable days in the first year and 25 in the next.

A day on which the employee had the car for part of the day is a day it was available. In HMRC’s example at EIM25150 the car was damaged on 3 November and collected on 4 December, so the qualifying period was 4 November to 3 December inclusive, exactly 30 days.

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When does HMRC accept the car was not available?

Available is not defined in the legislation, so HMRC applies its ordinary meaning of capable of being used or at one’s disposal (EIM23300). Two questions must both be answered yes: is the period long enough, and do the facts show the car was not available? HMRC accepts a car is unavailable where (EIM25170):

it is physically incapable of being used, for example broken down and unrepaired, or still in the garage being repaired; or
the employee cannot get access to it because they do not have the keys and have no power to make the keyholder hand them over or drive them where they choose.

HMRC does not accept a car is unavailable simply because the employee is banned from driving, abroad on business or holiday, or unable to drive through illness (EIM25175). The test is whether the car is available to the employee, not whether the employee is available to the car. Nor is a car unavailable just because it has no road tax, MOT or insurance. If one of those situations leads the employer to actually withdraw the car, so the employee has no access to it, the reduction can apply for a period of 30 consecutive days or more.

How is the reduction worked out?

Illustration only. An employee has a car all year with a full year cash equivalent at step 6 of £10,000. It is damaged and taken to a garage on 9 June 2026, and the employee collects it on 15 July 2026.

Item	Figure
Days fully off the road (10 June to 14 July 2026)	35
Days in 2026 to 2027	365
Reduction: £10,000 × 35 ÷ 365	£959
Car benefit after step 7	£9,041

If the same car had been collected on 29 June, the gap would have been 19 days and there would be no reduction, even though the employee had no car for almost three weeks. If the employer lent a replacement car during the repair, the rules in replacement company cars decide whether that car is taxed too.

Does fuel benefit go down as well?

Yes. Under section 152(1) the car fuel benefit is proportionately reduced for any part of the year in which the car is unavailable within the meaning of section 143. HMRC confirms at EIM25565 that the same definition applies and the reduction exactly matches the reduction in car benefit. Fuel benefit can also be reduced for days after free fuel is finally withdrawn, as explained in the car fuel benefit charge.

What about a car provided or returned during the year?

A car first made available on 1 September is unavailable for every earlier day in the year under section 143(2)(a), with no 30 day test. The same applies to days after the car is handed back when an employee leaves or gives up the car. Where an employee changes car part way through the year, HMRC’s guide 480 at paragraph 12.37 says the two cars are treated separately, each with its own reductions for the days it was not available.

What should employers keep on file?

The figure that goes on the P11D, or into payroll where benefits are payrolled, is the reduced cash equivalent, and Class 1A is calculated on the same figure. If HMRC later queries the reduction, the employer needs to show both the dates and the reason. Useful evidence includes garage job sheets and invoices showing when the car went in and came out, a written record of when keys were returned and reissued, and any letter withdrawing the car. See P11D and P11D(b) forms and payrolling benefits in kind.

What mistakes come up most often?

Claiming a reduction for a gap of less than 30 days.
Counting the days the car went into and came out of the garage.
Reducing the charge while the employee was on holiday, on long sick leave or banned, with the car still at their disposal.
Applying the reduction after deducting private use payments, rather than before.
Forgetting to reduce the fuel benefit by the same proportion.
Ignoring a qualifying period that straddles 5 April, which counts in both years.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.