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Fuel card tax and NI

Fuel card tax and NI

Company is giving two employess fuel cards to cover both business and private mileage.  Employees will NOT be asked to reimburse the company for private fuel.  Employees use their own vehicles. 

Issues here as far as I can tell are:-

1. (easiest first) Fuel scale charge will apply for each car

2. Each employee will be taxed on the expenditure on the fuel card via section C of form P11d.  I ASSUME IF THEY CAN SHOW THE BUSINESS / PRIVATE SPLIT THEN ONLY PRIVATE WILL BE DECLARED / TAXED AND I ASSUME IT WILL BE THE GROSS AMOUNT (ie including VAT)

3. Each employee will pay NI on the expenditure via the payroll.  Again, I assume the amount to be added will be gross amount (ie including VAT) and I assume the procedure will be to added the fuel expenditure to the gross wage to calcualte the NI and then to deduct the same figure from the net wage as its already been "paid"

Am I correct?


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10th Oct 2011 10:23

I may be wrong but...

... my understanding of the legislation is that the full amount of expenditure on the card (including for business mileage and including VAT) falls to be treated as a benefit and the employee can then claim expenses (mileage allowance relief at 45p/25p per mile), which then means that Class 1 NIC is charged on the whole expense incurred on the fuel card.

When you say fuel scale charge, I assume that you mean VAT fuel scale charge.  You are correct, in that case, but may want to consider only reclaiming VAT on the business fuel as an alternative.

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10th Oct 2011 11:58



re 1  as the cars are the individuals - there is NO fuel scale as this relates to CO CARS so surely no other deductions , VAT corp tax, depreciation/allowance etc

re 2 +3 should the value incl vat not just be payrolled monthly ? ie- charged to paye + ni + ers ni [ under your approach ] and then end of matter for the co ? the employee then could if they retain sufficiently accurate records, on their own personal tax returns, make a claim for mileage. Why would the Co also entertain a mileage claim[george above ] on top of having paid the full fuel

of course not using the fuel card for 100% fuel gives other options

employee could reimburse the full fuel card, less the private mileage claim  or deduct with consent full fuel card form payroll and receive mileage claims at HMRC rates

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10th Oct 2011 12:18


I wasn't suggesting that the employees be reimbursed mileage by the employer as well as having private fuel paid.  My view is that the use of a fuel card (a credit token) gives rise to a BIK to the extent of all expenditure incurred on it (including business fuel), but that for tax purposes the employee can make an expense claim for the business miles.

This ends up giving a bad NIC position on the proposal as suggested though. IMHO.

I agree that there's no fuel benefit, as they're not company cars, but I do think Mike is talking about VAT fuel scale charges (that do still arise if employee private petrol is paid for and input VAT claimed thereon).

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By MikeJT
10th Oct 2011 15:52


GA.....you are correct in the assumption that the scale charge I was referring to was for the fuel was the VAT scale charge.  A quick calculation is that the input VAT on private fuel will exceed the relevant scale charge and therefore full recovery would be beneficial.

I also like the idea of it being down to the employee to make a business mileage claim in their own right if they choose to do so.  I assume they will sort this out by reference to their own SARs

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10th Oct 2011 16:23

That's correct...

... they can either make their mileage claims through a Tax Return of through HMRC's claim form P87.  http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=lNKqI3HRKkQ&formId=769

However, the most significant thing is that the employer (and the employee) will end up paying NIC on all the fuel (not just the private fuel) if you go down this route.

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By MikeJT
10th Oct 2011 16:37

Cheers George.  Thats what I

Cheers George.  Thats what I was thinking.  I am asking the employer to think about telling the employee that he will get a payrise equivalent to his normal commute fuel and add it to his salary and for him to claim business mileage like all the other employees.  He will pay his Tax and NI on the same figure (salary or fuel), the company will pay the NI on the "payroll" element....AND ITS SIMPLE!!!!


At present we have a situation were the employer can recover the VAT on the fuel BUT this is being outweighed by the VAT scale charge and the NI on the business fuel.


From the employees point of view I assume that it would be possible for the mileage claim to outway the the possible tax and NI incurred on the benefit/payroll entry for the business mileage, so if he has a fair amount of business mileage then he's laughing and it could be costing the company the NI!!!

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10th Oct 2011 16:48

I'd have thought...

... that the payroll approach you're suggesting with a formal claim (to the employer?) would end up saving everybody money.  Every time I think about it, the provision of a fuel card to someone without a company car, just seems to get worse and worse.

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By MikeJT
11th Oct 2011 08:42

Worse and worse.....

" Every time I think about it, the provision of a fuel card to someone without a company car, just seems to get worse and worse."


Tell me about it !!!!


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