REIMBURSE PRIVATE FUEL BY JULY TO AVOID FUEL BENEFIT

Gerry MacCrossan

REIMBURSE PRIVATE FUEL BY JULY TO AVOID FUEL BENEFIT


Another consequence of the lockdown period is that employees may have driven fewer private miles in their company cars, particularly where they have not been driving to the office.

If they are to avoid being taxed on the provision of private fuel, they need to fully reimburse their employer for the cost of private fuel by 6 July 2021 for the 2020/21 tax year.

CO2 emissions percentage for a car is multiplied by the £24,500 notional list price used to calculate the benefit. For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9065 for 2020/21. If they are a higher rate taxpayer, then that means £3,626 tax.

In addition to the tax payable by the director on the provision of private fuel, there would be £1251 Class 1A national insurance contributions payable by the employer.

The private fuel benefit is an all or nothing benefit. It must be fully reimbursed by the 6th of July to eliminate the benefit. The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle.

These are the suggested reimbursement rates for employees’ private mileage using their company car from the 1st of June 2021.

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

Engine Size Petrol Diesel LPG
1400cc or less 11p

(10p)

8p

(7p)

1600cc or less 9p

 

1401cc to 2000cc 13p

(12p)

 

9p

(8p)

1601 to 2000cc 11p

 

Over 2000cc 19p

(18p)

13p

(12p)

14p

(12p)

 

For hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to one month from the date the new rates apply.