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| Providing Fuel For Employees |
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| It is suprising how many employers still provide fuel along with company cars as this approach is very often not economic. With a scale charge at 15-35 per cent calculated on the fixed sum of £14,499, many drivers would find it cheaper to pay for all fuel than pay the tax charge. |
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My proposition for change is that the employer:
* Saves on the cost of fuel.
* Saves the Class 1A NIC of 12.8 per cent on the (non-commercial, overstated) fuel benefit charge.
* But pays for business fuel on a mileage basis at HMRC rates (currently 7-16p per mile, depending on the car's engine size and fuel type). The VAT can still be reclaimed if the employee provides garage receipts, not necessarily with every expenses claim, but enough to cover past business mileage.
Thus the employer effectively avoids the cost of paying for the employee's private fuel.
The employee:
* Saves the income tax on the fuel benefit charge.
* Pays for all fuel but receives non-taxable/non-NICable reimbursement for business miles.
In many cases, just looking at the employee's finances and disregarding the employer makes the decision obvious. Where that is not so, the employer could share their own savings by giving a small pay rise.
Each individual needs to be considered separately, as their total and mix of business/private miles will vary so much, as will the fuel efficiency and fuel type of various cars. The position of director-shareholders should also be included in any exercise.
Don’t be put off by the fact that we have recently started a new tax year. It has been possible for a few years now to get the benefit of a change like this straight away without waiting for next 5 April. |
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