Quantcast
Viewing all articles
Browse latest Browse all 25

Driving the costs of company fuel: what can you claim?

The use of a company vehicle where an employer also provides fuel can result in an expensive and unwanted tax cost for the unwary. For example, does the company provide a fuel card to its company car users and if so is the employee required to repay the cost of any private mileage to the company? Perhaps most importantly, when doing this is the employee clear on the difference between private and business mileage for employment tax purposes?
Fuel cards
A company that provides a vehicle may also supply the user with a fuel card which can be used to buy fuel at the pump. What happens next will either be:
• The user and main driver of the vehicle, will use the card to pay for the fuel and none of that cost will be required to be reimbursed to the company, or;
• Of the costs covered on the fuel card the employee is required to repay the element of the fuel cost that is considered to be in respect of the “personal” mileage element.
The company will decide which of these options will apply to the employee for tax purposes and whether or not the company will bear the full fuel cost to include the private mileage element. If it does (and option 1 above therefore applies) a taxable fuel benefit in kind (BIK) will be in point. To avoid the BIK, the employee must repay the private fuel element, but it is important to emphasise that the entire private mileage element must be repaid in order to eliminate the charge, otherwise HMRC will seek the full BIK charge.
Business or pleasure?
Whether mileage is private or business mileage is largely determined by the purpose of the journey, the time spent at the location visited and the nature of duties carried out at the destination. The considerations in this area are complex. Broadly business mileage will include travel to a “temporary” workplace where the employee travels to carry out duties directly relating to the employment. It does not cover any domestic travel, for example, from the employee’s home to his or her permanent workplace.
Understanding the distinction between a permanent place of work and any other (temporary) places the employee may visit for business purposes is very important. It is quite possible for a workplace which is visited regularly and which is not the primary permanent workplace to become a second permanent one if it is visited regularly and/or routine tasks are carried out there.
Accurate categorisation is therefore essential. If a company thinks it is being reimbursed the full cost of the private mileage an employee has travelled and a subsequent review by HMRC identifies some additional private mileage (where a temporary workplace turns out to be a permanent one) this will result in an unexpected and expensive car fuel benefit in kind.


Viewing all articles
Browse latest Browse all 25

Trending Articles