Private Fuel

Where a company operates a fuel card scheme to allow its employees to purchase fuel on the company’s account there is a potential ‘benefit in kind’ for private usage.

This benefit is significant and unless an employee has a large amount of private mileage (and the company is happy to pay for the associated fuel and Class 1A National Insurance) both parties would be better off if the private element of fuel usage were reimbursed.

The easiest way to facilitate this is simply to multiply the private mileage for a given period by the “Advisory Fuel Rate” for the vehicle in question (based on fuel type and engine size) which results in an amount due to company.   This amount is then recovered from the employee in the most appropriate manner.

The only issue here is the calculation of private mileage.  HMRC requires that employers keep records that are sufficient to demonstrate that all private fuel has been reimbursed by the employees.  In some cases where HMRC believe that records are not sufficient they may try to argue that all fuel (even the business element) should be subject to a benefit in kind charge.  It is therefore essential that suitable measures are in place to record business journeys and to administer the reimbursement and connected calculation. The manner of administration is not clear, so to help with this here are some tips:

·         Use the start and end odometer readings for a given period as a starting point;

·         Log  business mileage daily detailing start and end points with all stops along the way;

·         Record the date and purpose of business journeys;

·         Consider logging individual journeys for greater transparency;

·         The difference between odometer readings and business mileage = private mileage, no need to record individual private journeys (it is private after all!);

·         Consider logging any reasons for private mileage variation from month to month to serve as a reminder should there be any queries in the future;

·         Compare private usage  of all employees to identify potential inflation of business mileage;

·         Have stated fuel card procedures.  Put these in writing and ensure that all employees are aware;

·         Carry out regular checks on the accuracy of mileage claims.

As with anything tax related this is a complex and somewhat subjective area.  HMRC are taking increased interest in this subject so if you think you are affected by this please get in touch: brandon.theron@wardwilliams.co.uk