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Company Car Fuel Benefit - partway through Year

Is the fuel benefit charge pro-rated?

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An employee with an existing company car does not have a fuel benefit. Due to change of work location, part way through the tax year, he takes a fuel card with all private mileage paid for by the company.

Wrote to HMRC and they added a pro-rated charge to his tax code. A few days later, a new tax code was issued with a charge for the whole year. On querying it with HMRC they say that there is no reduction for a benefit provided part way through the year. There is a reduction if the card is taken away though.

My employee benefits knowledge is quite rusty now, but surely this cannot be true? To be taxed on a benefit that you did not even have? I have checked the manual but can only see what happens when fuel ceases (and you are allowed to pro-rate it!)

Thanks for any clarification!

Replies (11)

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By Payrollgal
11th Sep 2019 14:19

I would suggest speaking to HMRC again, sounds like nonsense!

Imagine the amount of people starting a new job mid-year that get a fuel card.

In fact, could you imagine starting a new job a few days before the end of the tax year and being charged a years worth of benefit. No chance

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Psycho
By Wilson Philips
11th Sep 2019 15:07

HMRC are correct. It is reduced for periods when the car is not available (which takes care of the example above where an employee starts during the year). Otherwise, if the car is available all year, then the full year fuel benefit amount applies - except, as noted above, it is withdrawn.

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Replying to Wilson Philips:
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By Payrollgal
11th Sep 2019 15:13

Learn something new every day!

Great answer

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By Tax Dragon
11th Sep 2019 15:14

Curiously, commentary also mentions only cessation, not commencement, of the benefit. But s152(2) does not seem to discriminate so - so I agree, call them back.

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Replying to Tax Dragon:
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By Tax Dragon
11th Sep 2019 15:16

That said, HMRC and commentary are probably looking at s152(3). (3) would seem otiose if my reading of (2) is correct, so this may be more awkward that I'd expect.

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Replying to Tax Dragon:
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By Tax Dragon
11th Sep 2019 15:19

Correction number 2: I'm completely misreading (3). It's disapplies (2) if the fuel is made available later in the year. So it seems HMRC are right.

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Replying to Tax Dragon:
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By Tax Dragon
11th Sep 2019 15:53

And now I see Wilson had already answered, though I'm sure that wasn't showing when I started my journey of discovery (and I hope my addition of legislative references is useful).

I love Aweb's foibles. Maybe.

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By Jholm
11th Sep 2019 15:15

This is why, as an efficiency point, employers often try to give fuel cards from the start of the tax year.

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By catlady
11th Sep 2019 17:14

Thanks everyone, it seemed so unfair that I felt that it surely must be wrong!

If he had changed cars at the same time, it would have been pro-rated. Oh well, a strange rule indeed!

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By Democratus
12th Sep 2019 10:04

Just get the Private Mileage element removed and no P11D...though I expect the card was issued to cover the cost of commute if the change in location is further away.

I actually got caught myself with this very scenario years ago.

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By johnacarpenter
12th Sep 2019 11:52

There was a case many years ago now when HMRC charged an employee fuel benefit because when the car was purchased it had fuel in the tank. This was deemed to be private fuel supplied.

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