To avoid a tax charge arising where you provide an employee with fuel for their company car, have an agreement requiring them to reimburse the cost.
Fuel benefit charge
In addition to the company car benefit, a director or employee who is provided with a company car may be liable to a fuel benefit charge. This fuel benefit will arise on any free or subsidised fuel provided for private journeys.
How much is it?
When a company pays for fuel used in private journeys whether for a single journey or mulitple (e.g. five or 50,000 miles), the tax charge remains the same. The fuel benefit is calculated by taking the percentage used to calculate the car benefit and multiplying it by a set figure for the tax year. Depending on the company car’s CO2 emissions, the annual tax bill for the employee could be over £3,000 with the employer having to pay up to over £1,000 in the corresponding Class 1A NI bill.
Avoiding the charge
To avoid the fuel benefit charge, employees must show that the company doesn’t meet the cost of any fuel for these private journeys. There are three ways to do this: