P11D - Company Cars

Gianni Registered Posts: 99 💫 🐯 💫
Hi all

Looking for a bit of advice really. An employee here has been given a company car, therefore a P45 (Car) form has been filled out. This was way back in February. I'm now looking to fill in the P11D for this employee, they've no other benefits apart from this car.

I'm happy filling the car benefit for the 2 months or so, but what about fuel benefit? It seems very inefficient to provide fuel for private use so therefore I'll probably advise the employee to pay for all private fuel usage (I know I'm a bit late!). How do people go about measuring this? i.e. if they did 100 miles private usage in one month, how would you go about calculating that in fuel terms? Would you work on the miles per litre measurements and then multiply by cost per litre?


  • Ratherbefishing
    Ratherbefishing Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
    Hi ya.....

    Hi ya.

    With the private fuel element have you not got the option for the employee to reimburse the company at a rate of .12p per private miles travelled – if so, this would in essence alleviate the problem of any car fuel benefit?

    You may want to check this option?

  • Poodle
    Poodle Registered Posts: 711
    Hi Gianni

    You are talking about the advisory fuel rate.

    The following will help


  • Gianni
    Gianni Registered Posts: 99 💫 🐯 💫

    Thanks for both your advice. I consulted our auditors to ask for their opinion which pretty much backs up what you've both suggested. For the benefit of anybody else who may find themselves in the same situation as me, here's what they suggested:

    1) Total up cost of fuel incurred in the month
    2) Ensure detailed mileage logs for business mileage are kept and multiply this figure by the advisory fuel rate (17p currently for a diesel car above 2000cc)
    3) Deduct the mileage log amount from the total cost of fuel incurred

    This should give a situation whereby the employee pays for their private mileage. It's done this way as oppose charging directly for the private mileage to satisfy HMRC.

    A worked example:
    £550 worth of fuel in the month
    2500 miles travelled in a diesel with a 3.0L engine

    2500 x 0.17 = £425.00

    £550 - £425 = £125.00

    Therefore the employee would have to pay the company £125 which would work out to be their private usage. Obviously it could just be that HMRC's advisory rates are slightly out as well, but at least this way HMRC will not query it.

    It's only beneficial tax wise doing it this way if private use is limited, else a fuel benefit charge may be the way to go (but I'd say this is rarely the case!).
  • Poodle
    Poodle Registered Posts: 711

    If you are going to operate this you might also find it helpful to get the employee to sign an authority to deduct their private mieage cost from their pay. That way you do not have to go around asking for payment each month. Just make sure that you send a reconciliation and notification of deducion to the employee a couple of weeks prior to payroll so everyone knows what is happening.

    My son has this with his company car and it works very well, except that the advisory rate is not keeping up with the price of fuel:mad2:

  • Gianni
    Gianni Registered Posts: 99 💫 🐯 💫
    Hi Poodle,

    I've informed the employee and he's fairly happy as he's going to be saving a good £1500 or so! Unbelievably our auditors in the past just put through a fuel benefit charge without even discussing the tax implications with the employee concerned. It's only now that I'm doing the P11D's that I've queried this method and low and behold he saves cash.

    I'm going to operate it using a loan account which will also act as my reconciliation to give to the employee. It will also show HMRC were all the journals and the likes will be getting posted!
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