Does your employer pay for your private petrol?

A reminder that you can avoid the hefty car fuel benefit charge if you drive a company car and your employer pays for your private fuel.

One way to achieve this is to repay your company for the private petrol provided.

Many employers have an arrangement with their company car drivers to obtain reimbursement of any private fuel provided. Usually, the employee must reimburse the employer for private fuel included in petrol bills paid by the employer. Otherwise, the employee may face a tax charge.

Consider the following example:

If your private mileage for the year to March 2020, is estimated to be 600 miles a month, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges, as quoted in the latest rates published by HMRC, is 12p per mile. Accordingly, you should repay £864 to your employer (£72 per month).

In order to exempt yourself from the car fuel benefit charge you must be able to demonstrate that the refund was actually made in the relevant tax year, in this example before 6 April 2020; although in practice, HMRC may give you more time.

Based on the above example, if the vehicle’s list price when new was £30,000, and the car benefit charge rate was 34% (based on a 130g/km CO2 rating) the benefit in kind charge for 2019-20 would be £10,200. With no repayment of private fuel, there would also be a £8,194 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax-payer, the car fuel charge would cost you £3,277 a year in additional tax (£8,194 x 40%). This amounts to £273 per month.

If your actual private mileage proved, on average, to be 600 miles a month, you would therefore save £201 per month (£273 – £72).

It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money.

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