An employer can provide private fuel for company car drivers and a benefit-in-kind will arise. However, this benefit can be avoided where the cost of the fuel used for private purposes is repaid to the employer.
Specifically the law requires employees to repay the cost of the private fuel ‘in the tax year in question’. However, guidance states that, in cases where this does not happen, HMRC may accept this as being repaid in the year provided final settlement is made without unreasonable delay. For example where mileage records and repayments in the final months of the year take time to process.
In a recent case, two employees paid for all fuel for their company cars and kept mileage logs to record business mileage. They completed a monthly expenses claim, showing the total mileage travelled in the month, and then deducted the business mileage recorded. The difference was shown as private mileage and they deducted 15p per private mile from the total spent on fuel in the month. The balance was then reimbursed to them by the company.
Enquiries by HMRC showed that the car mileage logs were inaccurate and that private mileage was underestimated, creating fuel benefits for the years concerned as the full cost of private fuel was not made good in those years. The employees later repaid all the monies they had previously received to try and cancel the fuel benefit arising.
HMRC won this case, creating a high tax bill for those concerned, despite the concessionary treatment in HMRC’s guidance. This case illustrates three particular points for those in a similar position:
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