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Why do they subtract the employee contribution first? I am using last years BPP textbook and study hub, but do not see any rules explaining why the taxable benefit would not be reduced to zero in the following question.
Stuart has the use of a company car. The car has a list price of £16500 and an official co2 emission rate of 88g/km. Calculate the taxable benefit assuming that Stuart had made a capital contribution of £5500. The answer in the text is (£16500- £5000)*.22 shouldn’t it be ( £16500*.22)- £5000 =0
(Relevant % * list price of car) less Employee ContributionThey subtract the contribution first in this scenario as it’s a CAPITAL contribution; i.e. a one-off contribution towards the purchase price of the car as opposed to a regular contribution towards the private use of the car. A CAPITAL contribution reduces the list price for the purposes of calculating the benefit, whereas a regular contribution reduces the benefit once it’s been calculated.
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