SHOULD EMPLOYEES REIMBURSE THEIR EMPLOYER FOR PRIVATE FUEL?

Where a company car is provided for use by an employee or director there is a benefit in kind taxable on the employee based on the original list price of the vehicle multiplied by the CO2 emissions percentage for that vehicle. There is an additional benefit in kind where private fuel is paid for by the employer, which also needs to be reported on form P11D unless the employer has arranged with HMRC to deal with the tax on the benefits via monthly payroll.

Note that unless the employee fully reimburses the employer for private mileage, the additional benefit in kind is based on a notional list price of £27,800 multiplied by the CO2 emissions percentage for that vehicle. That could be as much as 37%, £10,286 for a car with high CO2 emissions. That would mean £4,114 income tax for a higher rate taxpayer. That would be an awful lot of fuel!

In addition, there would be £1,419 class 1A national insurance contributions payable by the employer.

The table below sets out the HMRC advisory fuel rates from 1 June 2024. These are the suggested reimbursement rates for employees’ private mileage using their company car. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years.

Note that this is an all or nothing benefit and, unless there is full reimbursement, there is an additional taxable benefit. The deadline for reimbursing private fuel is 6 July 2024 for the 2023/24 tax year.

Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

Engine SizePetrolDieselLPG
1400cc or less14p

(13p)

 11p

(11p)

1600cc or less 13p

(12p)

 
1401cc to 2000cc16p

(15p)

 13p

(13p)

1601 to 2000cc 15p

(14p)

 
Over 2000cc26p

(24p)

20p

(19p)

21p

(21p)

Where there has been a change the previous rate is shown in brackets.

You can also continue to use the previous rates for up to 1 month from the date the new rates apply.

Note that for hybrid cars you must use the petrol or diesel rate.

For fully electric vehicles the rate is 8p (9p) per mile.

Employees using their own car

For employees using their own car for business purposes the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate continues to be 45 pence per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25 pence a mile thereafter. Note that for National Insurance contribution purposes the employer can continue to reimburse at the 45p rate as the 10,000 threshold does not apply.

Input VAT

Within the 45p/25p payments the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 2500cc petrol-engine car, 4 pence per mile can be reclaimed as input VAT (24p x 1/6).

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