Reimburse private fuel by 6 July to avoid fuel benefit

  

Reimburse private fuel by 6 July to avoid fuel benefit

 

One consequence of the recent periods of lockdown 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.  If not, the benefit needs to be reported on the employee’s form P11D for 2020/21.

The CO2 emissions percentage for the car is multiplied by the £24,500 notional list price used to calculate the benefit for 2020/21.  For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,065 for 2020/21.  If they are a higher rate taxpayer that would mean £3,626 tax.  That would be an awful lot of private fuel!

In addition to the tax payable by the director on the provision of private fuel, there would be £1,251 Class 1A NIC payable by the employer.

The private fuel benefit is an all or nothing benefit.  There must be full reimbursement by 6 July 2021 to eliminate the benefit.  The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle is is amended every three months.

Advisory fuel rates from 1 June 2021

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2021.  Where there has been a change the previous rate is shown in brackets.

Engine Size	Petrol	Diesel	LPG
1400 cc or less	11p (10p)		8p (7p)
1600 cc or less		9p
1401 cc to 2000 cc	13p (12p)		9p (8p)
1601 to 2000 cc		11p
Over 2000 cc	19p (18p)	13p (12p)	14p (12p)

For hybrid cars, you need to 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.

For earlier quarterly figures see: Advisory fuel rates – GOV.UK (www.gov.uk)

Recovery of Input VAT on employee fuel

These HMRC advisory fuel rates may also be used to calculate input VAT that may be claimed by the employer where an employee uses their own car for business journeys.  The tax-free reimbursement amount continues to be 45p per mile (plus 5p per passenger) so for a 1800 cc diesel car, 11p of the 45p is deemed to be diesel and 20/120 of that amount, 1.83 pence per mile, may be reclaimed by the employer, provided there are petrol station receipts to cover the amounts claimed.

Output VAT on the supply of private road fuel

HMRC have amended the VAT road fuel scale charges with effect from 1 May 2021.  Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2021.

The valuation rates tables:

• set out the new scale charges (a VAT inclusive amount).
• show the VAT to be charged if you account for VAT on an annual, quarterly or monthly basis.
• must be operated in accordance with the notes to the valuation table.

Notes to the CO2 emission figures

You will need to check your car’s CO2 emmissions figure if you cannot get this from your log book.

Where the CO2 emission figure is not a multiple of 5, the figure is rounded down to the next multiple of 5 to determine the level of charge.

For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used.   For cars which are too old to have a CO2 emissions figure, you should identify the CO2 band based on engine size.  If its cylinder capacity is:

• 1,400 cc or less; use CO2 band 140
• 1,402 cc to 2,000 cc; use CO2 band 175
• 2,001 cc or above; use band 225 or more

Using the table

You need to choose the correct road fuel charge based on the CO2 emission adn the length of your VAT accounting period (either one month, three months or twelve months).

You will need to apportion the fuel scale charge if you change car during the accounting period and, at the end of the period, you do not own or have not been allocated the car.

You need to work out how much of the accounting period you used each car for, and record this is a percentage of the accounting period.  You must apply this percentage to each road fuel scale charge to get a total figure.

See: 
VAT road fuel scale charges from 1 May 2021 to 30 April 2022 – GOV.UK (www.gov.uk) 

 

If you need any help or advice, please don’t hesitate to get in touch.

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