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Company car - how to account for private fuel?

Company car - how to account for private fuel?

A company car is going to be provided to an employee.  Only business mileage will be reimbursed.  

It is likely the employee will pay for fuel on the company credit card so my question is how the private fuel will be paid for as the company will not be paying for this. 

Is the easiest way to allow the employee to put all fuel on the company credit card, and record business trips.  At the end of the year, the mileage logs for business can be compared against the mileage on the car speedometer and then the employee can pay back the personal fuel amount used to the company. 

Would this be the best way to account for the private fuel or what is the norm in this situation? 


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24th Feb 2012 11:18

far easier for the employee to pay all the fuel themselves and reclaim business mileage via monthly expense claims forms at the fuel only hmrc authorised rates.

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24th Feb 2012 18:38

Also much safer from attack

And the preferred HMRC way of doing it.  If the employee pays the company back for private fuel, some private journeys could be missed, but do it the other way and claim for business miles, then assuming they are all genuine business journeys, there is no danger of having private miles in there by accident.

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By cfield
25th Feb 2012 01:48

Be very careful!

You need to careful with corporate fuel cards because if the driver makes mistakes on the mileage logs, or is late reimbursing private mileage, HMRC could deem that private fuel has been paid by the employer and impose the fixed £18,800 fuel benefit charge.

For a higher rate taxpayer driving a company car in a typical tax band of say 22%, that would create a combined tax and NI liability of £2,225 - a high price to pay for just a small error.

This is especially relevant at the end of the tax year, when there is only a short time to work out private mileage and reimburse it. Any delay deemed unreasonable by HMRC could trigger the fuel benefit.

I believe there was a tribunal case on this very point a couple of years ago where the taxpayer lost because reimbursement was made too late.

Other danger points are:

a) rounding up business mileage to the nearest zero

b) counting home-to-work as business mileage

c) getting the advisory fuel rates wrong (they changed quite a few times last year).

d) not reconciling mileage to the odometer (this should really be checked more than once a year)

As Taxhound said, it is usually best for the employee to pay for all fuel up front and claim business mileage later. Errors can then be rectified in good time and without fear of triggering a fuel benefit. However, this might prove to be very inconvenient, so it's a case of weighing up the pros and cons really.

There's a very good article on mileage claims in Accountancy this month by Paul Jackson (see page 54).

There's also a useful book by Tax Cafe called "Tax Saving Tactics for Motorists" which explores the tax efficiency of fuel cards. I must admit to a shameless plug here though, as I'm the author!


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27th Feb 2012 10:21

Thanks for the information.  Very useful.  I think i will try and push forward the employee paying for all mileage and claiming back the business fuel advisory rates in that case.  

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