One of the most common areas of uncertainty when it comes to fuel expenditure for companies is tax liability. Understandably, businesses and other organisations are keen to minimise or even eliminate any tax liability. But many are unsure how to do this.
This guide sets out the facts when it comes to paying for fuel, business travel, personal travel, benefit in kind tax and other taxes:
- What is benefit in kind tax?
- What is private fuel provision?
- Advantages and disadvantages of private fuel provision
- How to minimise benefit in kind tax liability
- How to completely avoid benefit in kind tax liability
- Other taxes to be aware of
- Using fuel cards to pay for company fuel
What is benefit in kind tax?
This is a tax levied by HMRC on any private expenses provided by companies to their employees. When talking about driving, it includes:
- Company cars used for private journeys
- Cars adapted for an employee with a disability
- Fuel for private journeys
What is private fuel provision?
Private fuel provision is, quite simply, any fuel paid for by the employer that is used by the employee for non-work purposes. This can occur by accident as well as deliberately.
For example, if an employee uses a company credit card to top up their car before a work trip, then uses the rest of the fuel for their own private travel, that counts as a taxable benefit.
Advantages and disadvantages of private fuel provision
The only real benefit of private fuel provision is that it may be regarded as a perk by employees. In some cases, it may also leave the employee better off than paying for their own fuel.
The disadvantages are more numerous, and include:
- It is an expense for the employer
- It incurs a tax liability for the employee
- The tax amount due is complex to calculate – it involves multiplying the percentage of fuel used for private purposes by the relevant multiplier for the class of vehicle that tax year, to provide a figure
How to minimise benefit in kind liability
Keeping a tight control on the fuel used for private travel is essential. This can be done by encouraging employees to log travel carefully and limit non-work-related travel.
How to completely avoid benefit in kind tax liability
The only way to avoid incurring this tax is not to provide company cars for private use, or adapted cars, and to never pay for any private travel for employees.
You can do this by limiting the use of company or pool cars strictly to business travel. You can also provide employees with a controlled way of managing work-related fuel spending, such as a company fuel card.
Using fuel cards to pay for company fuel
Fuel cards offer a way for businesses to manage fuel spending, and also avoids employees having to reach into their own pockets before reclaiming the expenses.
fuelGenie is a fuel card that provides these advantages:
- Savings of over 3p/litre by consistently directing drivers to low-cost supermarket fuelling stations*
- No fees to pay for normal use
- 24/7 online dashboard for easy admin and management
- HMRC-approved invoices for easy VAT reclaim
- Up to 45 days of credit with no minimum spend
- Unlimited number of free fuel cards
- It allows drivers to gain reward points on supermarket loyalty cards