Should employees reimburse their employer for private fuel?
The table below sets out the HMRC advisory fuel rates that apply from 1 June 2023. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years. Where the employer provides an employee with a company car there may be an additional benefit in kind on the provision of fuel for private journeys which needs to be reported on form P11d.
This additional benefit is based on a notional list price for the vehicle of £25.300 for 2022/23 which applies irrespective of the original list price of the vehicle normally used to compute the taxable benefit. That figure is then multiplied by the CO2/km percentage for that vehicle.
For example, the Range Rover Evoke S AWD Automatic MHEV has a current list price of £41,245. The CO2 emissions data on the Land Rover website is 168g/km for this vehicle. which means that the fuel benefit is 37% multiplied by £25,300 = £9,361.
For a higher rate taxpayer that would result in a tax liability of £3,744. That would be an awful lot of fuel! In addition, the employer would have a Class 1A national insurance liability of £1,360 (14.53% for 2022/23).
Provided private fuel is fully reimbursed, the fuel benefit does not apply. This is an all or nothing benefit and unless there is full reimbursement there is an additional taxable benefit. The deadline for reimbursing private fuel is 6 July 2023 for the 2022/23 tax year.
ADVISORY FUEL RATE FOR COMPANY CARS
The table below sets out the HMRC advisory furl rates from 1 June 2023. These are the suggested reimbursement rates for employees’ private mileage using their company car. Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.
| Engine Size |
Petrol |
Diesel |
LPG |
| 1400cc or less |
13p |
|
10p |
| 1600cc or less |
|
12p
(13p) |
|
| 1401cc to 2000cc |
15p |
|
12p
(11p) |
| 1601 to 2000cc |
|
14p
(15p) |
|
| Over 2000cc |
23p |
18p
(20p) |
18p
(17p) |
Where there has been a change, the previous rate is shown in brackets.
You can also continue to use the previous rates for up to 1 month from the date the new rates apply. Note that for hybrid cars you must use the petrol or diesel rate. For fully electric vehicles the rate is 9p (8p) per mile.
USE OF HMRC ADVISORY RATES FOR VAT PURPOSES
Where employers reimburse their employees for using their own cars for business journeys the tax – free reimbursement rate continues to be 45p for the first 10,000 business miles and 25p a mile thereafter. There is also an additional 5p per mile per passenger. These rates have not increased for about 10 years!
Provided the employee provides a fuel receipt from the filling station the employer is able to reclaim input VAT on a portion of the amount reimbursed to the employee. The input VAT is 1/6th of the advisory fuel rate for the employee’s vehicle. For a 2200cc diesel car the input VAT would be 3.3p per mile based on 20p.