Employee Fuel Reimbursement

MelanieM

Hi,
Have been asked to find the most efficient way (to the employee) for an employee/Director to fuel his own car, and could do with a bit of input to check what i'm thinking...

The employee is going to purchase his own car and use it for business and personal mileage. What we're thinking of doing is him having a fuel card, the company paying for all of his fuel, this going on to his P11d, and then him making a claim for the business mileage (@40p per mile up to 10k miles, 25p thereafter) when doing his self assessment.

Is this the best way to do it? Would he be better of here rather than just claiming for business mileage via expenses forms, thus having to pay the whole cost of his personal mileage rather than just paying the tax on it/the benefit?

I know there's lots of implications to do with this area and i just wondered if anyone had any "bright ideas" that i'm not thinking of...

Thanks in advance

Mel:001_unsure:

BIG WAL

It probably depends on the amount of business mileage, but I would have thought it best is to log his business mileage and pay the HMRC rate (40p and 25p). The mileage rate is a legitimate tax deductible expense for the Company.

If the Company pays for any fuel at all, he immediately incurs a Car Fuel Benefit based on a percentage of £16,900 depending on the CO2 emmissions. That's taxable on his income at marginal rate, plus the Company will pay Class 1A NI at 12.8%

It may simplify admin to pay the mileage rate, and thus avoid any VAT complications as well, which I haven't thought about here.

DaveP

There is no car fuel benefit if the employee is providing his own car. The car fuel benefit is solely for private petrol provided to users of company cars.

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BIG WAL

I hesitate to disagree with Dave, but would have thought if company fuel is provided and there is any element of private use, a BIK occurs, unless the cost of private fuel is fully reimbursed to the Company. This is regardless of whether it's the employee's (or director's) own car, or a company car provided for his or her use.

My old course notes state "The provision of private fuel is a benefit in kind for directors and employees earning £8500pa or more. The only exceptions are where fuel is provided for business purposes only, or where the employee is required to pay for all private fuel". Nothing is mentioned about any difference between own car or company car. A car provided for the employee will attract a further BIK based on the list price x a percentage of the CO2 emmissions.

DaveP

Hesitate you should, what I say is correct.

The payment for private fuel in an employee's own car is, of course, taxable but not as a car fuel benefit. This only applies to company owned vehicles.

Poodle

Big Wal

What Dave says is correct you need to perhaps refer here http://www.hmrc.gov.uk/calcs/cars.htm :001_smile:

Melanie

I presume when you repay the card for your director each month then you are going to repay through the DLA? If you do then you need to report this on section C of the p11d.

BIK in this instance only comes into play if you reimburse an employee/director above the 40p/25p rate and only on the difference paid. Section E on a p11d.

The credit card could also be classed as an interest free loan to the employee/director depending on what other loans have been made available. Section H on the p11d

Also be careful as loans to directors in close company's could give rise to a S419 tax liability on the company.

To conclude I would suggest that the best way forward is for the director to get his own credit card, buy the fuel on that and then submit an expenses claim form for mileage.

Poodle

BIG WAL

Abject apologies. I am suitably chastened.

My mother always told me indulging in drugs, alcohol and loose women would have dire consequences. She was right. I will definitely cut down on on the alcohol.

MelanieM

Thank you everyone for your replies.

I'm still just a bit unsure as to why it would be better for him to just charge the company for his business mileage, therefore paying 100% of his private mileage himself, when the company is prepared to pay for ALL of his fuel, and him making a claim for business element on his tax return, thus only paying the tax and NI amount on the private fuel used (fuel cost less business mileage). Surely this is better than having to pay 100% of the private fuel? On a side note, his business mileage is likely to be much more than his private mileage.

Maybe my brain is just not getting it here, but i'm a bit confused...

Many thanks to all
Mel

PGM

MelanieM wrote: »

Thank you everyone for your replies.

I'm still just a bit unsure as to why it would be better for him to just charge the company for his business mileage, therefore paying 100% of his private mileage himself, when the company is prepared to pay for ALL of his fuel, and him making a claim for business element on his tax return, thus only paying the tax and NI amount on the private fuel used (fuel cost less business mileage). Surely this is better than having to pay 100% of the private fuel? On a side note, his business mileage is likely to be much more than his private mileage.

Maybe my brain is just not getting it here, but i'm a bit confused...

Many thanks to all
Mel

Better to do as you say, get all fuel paid for (personal & business), and off set the benefit in kind of the total fuel cost, with the 40p/25p business miles allowance.