The tax treatment of company cars is set out concisely and in plain English in a new leaflet published by the Inland Revenue today.

The leaflet is IR172 – ‘Income tax and company cars’ It updates and replaces leaflets IR132 – ‘Taxation of company cars from 6 April 1994: employers’ guide’ and IR133 – ‘Income tax and company cars from 6 April 1994: a guide for employees’ – and takes account of the changes to the company car business mileage and age-related discounts introduced from 6 April 1999.


1. Directors, and employees earning at a rate of #8,500 a year or more, including expenses payments and benefits, are taxed on the benefit of a car provided ‘by reason of their employment’ which is available for their private use – otherwise referred to a ‘company car’. Employers are liable for Class 1A National Insurance contributions (NICs) on the taxable benefit.

2. Leaflet IR172 explains how the benefit of a company car is calculated for tax and Class 1A NICs purposes. Aimed at both employers and employees, it combines and updates the guidance previously given in leaflets IR132 and IR133. The new leaflet reflects minor changes to the tax treatment of company cars since 6 April 1994 and the changes introduced from 6 April 1999 which pave the way for the proposed reform of company car tax from April 2002 which was announced in the March 1999 Budget.

3. Copies of the leaflet are free of charge, and are available from Inland Revenue Enquiry Centres, or Tax Offices, or from the Inland Revenue Information Centre, SW Bush House, Strand, London WC2B 4RD. The leaflet is also available on the Internet at:

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