Fuel ― company cars

By Tolley in association with Philip Rutherford
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The following Employment Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Fuel ― company cars
  • Introduction
  • Employees chargeable to tax
  • Exceptions from the fuel benefit charge
  • Calculating the benefit
  • Reporting the benefit

Introduction

When an employer provides fuel for a company car, a taxable benefit is likely to arise. The taxable benefit is specifically known as a fuel benefit charge. The fuel benefit charge arises in addition to the company car taxable benefit.

ITEPA 2003, ss 149–153

Detailed guidance on each of the following sections to cover specific circumstances is available at Simon’s Taxes E4.629 (subscription sensitive) and from HMRC at EIM25500 onwards.

Employees chargeable to tax

Almost any employee receives a taxable benefit when provided with fuel for private use (or amounts to cover fuel expenditure) by an employer in relation to a company car. The car fuel benefit charge replaces any other potential tax liability in relation to the provision of fuel, eg cash reimbursed to an employee for fuel which is then used in private mileage.

The key requirement is that fuel for private use must be provided in relation to a car provided by the employer. The fuel benefit charge does not arise for employees who are provided with fuel in respect of a privately owned car. In those cases, the fuel provided or amounts reimbursed are chargeable either as earnings or under the benefits code, unless an exemption applies, eg where the payment is in the form of an approved mileage payment. See the Fuel related payments / mileage payments guidance note.

A fuel benefit charge arises no matter how the fuel for private use is provided, whether by way of a reimbursement of the costs or a provision of voucher of tokens, eg an employer could either reimburse an employee for all of his expenditure on fuel or provide the employee with a fuel card. In both circumstances a fuel benefit charge arises.

ITEPA 2003, s 149(3)

If an employer makes a payment to an employee in relation to

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