I have agreed with my employer that I will not use my company car during the time I am laid off, but the car remains in my possession. Do I still have to pay tax on the car benefit?

Just because you do not use the car does not mean you are not considered to have a car benefit. If you want your taxable car benefit to be removed for the time you are laid off, you must not have access to the car during this time.

This means that you should return the company car to your employer. However, if you cannot return the car in these exceptional circumstances, you can just give the car keys to your employer.