Benefit in Kind for Car fuel for commuting

Benefit in Kind for Car fuel for commuting

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Hello,

I have a problem. We are looking to pay £4600 to cover an employees fuel cost for commuting to the office.

I know that there is class 1A NI payable of 13.8%, and that the figure has to be written in column f of the P11 form.

My Question:
1. What effect [if there is any] does this have on the paye code of the employee.?
2. Is there any other tax payable, bye employee or employer?
3. Is the total cost to the business just the extra Class 1A NI?

Thanks in advance for your help.

Manzar

Replies (19)

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By Steve Holloway
24th Oct 2012 16:47

It is just taxed as normal salary.

This is just a taxable allowance it doesn't matter what the employee uses the money for. The company will pay ERS NI and the employee will be subject to tax and NIC at their marginal rate.

Perhaps you are thinking of the situation when the company provides a fuel card to use with a company car? This would be subject to benefit in kind legislation but it sounds like you are just giving the money to the employee which is rather different.

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Replying to Weq1:
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By manzar
24th Oct 2012 17:39

Payment is for fuel
Thanks for the answer.

We are paying him directly to his account the fuel expense he occurs. We will work out mileage and then knowing the mpg, pay the exact amount that it would cost him.

Does this still mean it is not benefit in kind?

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By zeofiles
24th Oct 2012 19:59

Expenses or extra wages?
Sorry, to be clear are you paying him a round figure sum, or will the employee be paying for his fuel and then your going to reimburse them?

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Replying to Manchester_man:
By George Attazder
24th Oct 2012 23:52

It doesn't matter

zeofiles wrote:
Sorry, to be clear are you paying him a round figure sum, or will the employee be paying for his fuel and then your going to reimburse them?

Whether a flat amount is paid, or a personal expense is reimbursed, it's still pay ad PAYE/NI is operable through payroll.

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Euan's picture
By Euan MacLennan
25th Oct 2012 10:39

George is right

by which I do not mean to imply that George is ever wrong!

Commuting to the permanent place of work is not a business expense.  If an employer pays for an employee's commuting costs, it is the settlement of a personal liability of the employee and as such, must be processed through the payroll subject to PAYE tax and Class 1 NIC, not on a form P11D subject to Class 1A NIC.

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By manzar
25th Oct 2012 11:04

Thanks Euan

Problem solved, Thanks Euan.

Also thanks for all the comments.

 

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By pstatham
26th Oct 2012 12:18

Fuel

An employee pays for his own fuel for his own car. He then claims mileage back through expenses and he is paid at the the rate of £0.50 per mile, his expenses are then paid directly into his account via a bank transfer from head office in France. Are there any tax implications for this employee? He pays tax via PAYE.

Thanks

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Replying to Glennzy:
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By rtrussell01
26th Oct 2012 12:39

Mileage

The payments should be taxed as salary, apart from documented business mileage which can treated as tax free expenses up to 45p for 10,000 miles pa, and 25p thereafter under AMAPS.

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By pjones
26th Oct 2012 12:25

Yes there are issues

If the reimbursed mileage relates to private mileage (e.g. commuting) then this must be accounted for under PAYE as shown in George's post above.

If in relation to business mileage then as the 50p per mile is in excess of HMRCs approved rates then the excess charge will be shown on the P11D at the year end and the employee will be taxed on the excess amount - HMRCs approved rates are currently 45p for the 1st 10,000 miles and 25p per mile thereafter.

 

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By Vince54
30th Oct 2012 13:00

Don't forget the NICs!

In the above example of 50p per mile, where this is paid in respect of business mileage, the excess (number of business miles x 5p) must be put through the payroll for Class 1 NI purposes.  In respect of NICs, the 45p applies to all business mileage;  there is no reduction after 10,000 miles as there is for tax.  For tax pruposes the excess is reported on the P11D at year end.

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By davidgoodall
05th Nov 2012 10:14

I don't agree

If you're paying for fuel for commuting (i.e. for private use) the car fuel benefit charge applies.  The charge isn't on the money used for fuel but on the provision of private fuel.  Result:

1.  Employee incurs and is taxed on car fuel benefit charge

2.  Employer incurs Class 1A NICs charge on the amount of the car fuel benefit charge.

3.  If you pay him more than his fuel costs, normal PAYE applies on the balance - tax and Class 1 NICs for the employee and Class 1 NICs for the employer.

 

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Replying to DJKL:
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By Vince54
06th Nov 2012 12:40

Don't agree?

Not sure what you don't agree with (if it's my post).  My post was in response to the posting immediately prior to mine, and was in relation to payments for business mileage.

I do agree with you re the fuel benefit charge if a company car has been provided or treat as 'salary' as per your point 3

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By George Attazder
05th Nov 2012 11:14

Yes but...

... before you can have a fuel benefit, you need to have a company car, and have a car benefit (S.149(1)(b)).

If you're paying for fuel for the employee's own car, then that's settlement of a pecuniary liability, taxable as pay.

And if you're just paying a flat rate sum intended to cover the employee's private fuel costs (in their own car - as per the OP), that's just pay.

EDIT: Reading it back, the OP doesn't actually say that this relates to fuel for the employee's own car, but I'd taken it as being implicit from the nature of the question.  My inference may have been incorrect though.  If, in fact, the OP is asking in relation to a company car though, I'd certainly agree with David that S.149(3)(d) would prevent any additional taxable benefit on the expense arising to the extent that it represents actual expense.  Assuming David is this David Goodall, I think it would be fair to further assume that he's thought about it more than a little in the past.

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By justsotax
05th Nov 2012 11:07

@george...agree....

you could be paying for the bus fare, train ticket, his rent etc....but if it is not met directly by the employer paying the provider then it is pay....

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By Steve Holloway
06th Nov 2012 10:29

Funny ...

how we can all read the same question and reach a different assumption as to its meaning! Very good reason to be absolutely clear when drafting if you want an answer you can rely on.

So, company car or not?!

 

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By pstatham
08th Nov 2012 10:08

I'm not a tax expert. 

I'm not a tax expert. 

This employee receives a car allowance in his salary which he pays tax through the PAYE system.

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By User deleted
08th Nov 2012 10:15

If he gets a car allowance ...

... he doesn't have a company car!

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By tonycourt
08th Nov 2012 10:27

Manzar please put me (and others) out of my misery and...

....let us know whether or not the employee concerned drives a company car?

I suspect OGA is right but I would like to know for sure.

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By manzar
08th Nov 2012 10:34

sorry for the delay . No company car

Sorry for the delay.

The employee hasnt got a company car.

Thanks for all the comments.

 

Manzar

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