Someone has a company car with fuel card that the employer pays for. Each month the business mileage is calculated against the total fuel purchased, the difference being the private fuel used. This private fuel cost is deducted from the employee's monthly salary at source and is shown on their payslips as a negative figure under 'Pay & Allowances' rather than in the 'Deductions' column with NI, PAYE Tax deductions. If the employee is therefore paying back the private fuel to the employer, is the fuel cost added to the employee's overall taxable pay figure? For example: if their monthly basic pay was £2500, private fuel deducted was £200, their total earnings (before tax & NI) would be £2300. Is their 'Taxable income' £2500 or £2300? Seeking clarification please.
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Their monthly taxable salary is still £2,500, you just put the £200 as a deduction with no tax and NI so effectively you are just reducing the cash they receive each month after calculating their net pay.