Car Fuel benefit query

Car Fuel benefit query

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A client is allowed fuel up to £100 per month (paid for by the employer), any more than that and it is taxed via his monthly salary.

So in 2007/08 he has received in total £1,200 fuel, which covers primarily business but probably does include some private fuel too (albeit very limited).

His P11d shows a car fuel benefit of £2,627. Alas I think this is right. Common sense (!!) would say that how can the benefit be higher than the amount actually received. In theory you would expect the benefit to be £1,200 (being the cash equivalent as lower than the fuel benefit).

Any thoughts on how we might get the benefit shown as £1200 rather than £2627?

Suzanne Green

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By alanlowrey.hotmail.co.uk
05th Aug 2008 08:47

Never confuse tax and commonsense
The method of calculating the car fuel benefit bears no relevance to the quantity of private fuel used. Instead, the cash equivalent is calculated by applying the same percentage figure that is used to calculate the actual car benefit (determined by reference to the CO2 emissions level of the car) to a fixed figure "multiplier". Up to 2007/08 this was £14,400 - it is now £16,900. So, assuming a mid-range car with a CO2 derived percentage of 21%, the client could face a fuel benefit charge based on a cash equivalent of £3,024 (07/08) or £3,549 (08/09) even if he only used a few pounds worth of fuel privately.

Has your client kept a record of the business mileage in the tax year? If so, he may be able to calculate the number of private miles driven in the year, repay the costs of these to the employer using the Advisory Mileage Rates and avoid the fuel benefit charge.

As a final thought, it occurs to me that unless the employer has a dispensation to the contrary, the round sum monthly fuel allowance should be paid via the payroll anyway (regardless of whether it is more or less than £100).

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