Scenario: employee (director) has a private car but a company fuel card. They put 100% of their fuel (private or businesses) onto the fuel card and separately claim 45p mile for any business miles. The total fuel card annual spent amount (inc business miles) goes onto their p11d. They are a 40% income tax payer. So have (relatively speaking!) made a saving on their personal fuel.
Meanwhile the business disallows the fuel card spend(as not wholly and exclusively) but does deduct the 45p per mile for CT. It also claims back the VAT on the same basis (ie 20% of 45p per mile not 20% of fuel card spend). So gets a reasonable CT and VAT refund, albeit not quite what it spent on the fuel card.
It seems to me that the director has got some very cheap fuel, and reasonable mileage claims whilst the company is a little out of pocket but not by much as it can deduct quite a lot of CT and VAT (I acknowledge not quite as much as it spends on the fuel card). So overall it feels a little too good to be true! What am I missing?
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The Director should pay for the fuel himself and claim mileage. VAT is not 20% of the mileage, you need to look up the rate depending on the vehicle.
If the company pays for the fuel then this is a tax deductible expense but should have been payrolled.
Agree. The fuel card payments by the company aren't being treated correctly. They're part of the director's remuneration.
If I've understood this right, the director is paying no NIC and the company is paying too much corporation tax. Overall, not much in it.
Not quite. Very much part of his remuneration. Goes on his PIID and as such both he and the company pay their respective NIC.
I agree the company has higher CT to pay but at 19-25% this is still favourable than the director paying out of his earned income (at 40%)
But if the fuel card is in the employer’s name, and, cough, the employee advises the till attendant before filling up, this should be a P11D item.
As an aside, with pay at pump, how are employees supposed to fulfil the strict condition of advising the supplier before filling up?
But if the fuel card is in the employer’s name, and, cough, the employee advises the till attendant before filling up, this should be a P11D item.
As an aside, with pay at pump, how are employees supposed to fulfil the strict condition of advising the supplier before filling up?
It's always been blocks and everybody knows it.
If I remember rightly, wasn't it something HMRC (or perhaps HMC&E) came up with because the EU were whinging that there was a supply from the employee to the employer which stopped the VAT buck ?
It wasn't something that HMRC wanted to block and they came up with this fiction.
Never been brought up at a control visit. By anyone, anywhere, anytime.
Don’t know if this is still valid,but they were supposed to wave the card at the cashier before filling up.Have not looked at these scenarios for years,and I am going way back.One of those daft HMRC rules.
Don’t know if this is still valid,but they were supposed to wave the card at the cashier before filling up.Have not looked at these scenarios for years,and I am going way back.One of those daft HMRC rules.
Yeah, but it was a daft idea which prevented them being forced to withdraw a relief they didn't want to withdraw.
Laughable, yes. Daft, no.
Thank you! Yes I’d quite forgotten that the VAT is only on the fuel element. But even so 20% of 22p versus 20% of 40p is small enough to not change the overall conclusion.
Thank you! Yes I’d quite forgotten that the VAT is only on the fuel element. But even so 20% of 22p versus 20% of 40p is small enough to not change the overall conclusion.
20% ?