Taxable fuel provided for company cars and vans (480: Chapter 13)
Find out about tax and fuel benefit for company cars and vans.
Overview
13.1
Section 149
Where fuel is provided for a car the benefit of which is taxed in accordance with Chapters 11 and 12 (‘company cars’), a fuel benefit charge will normally apply to tax the fuel provided in addition to the car benefit charge. This is so whether or not the fuel is provided for private use.
Section 160
A fuel benefit charge also arises where fuel is provided for a van taxed in accordance with Chapters 11 and 14 (‘company vans’), but only where the charge arises under Chapter 14 paragraph 14.3.
See paragraph 13.5 below where the:
- fuel is provided only for business use
- employee or their family is required to and does cover all private fuel costs personally for the whole period for which the company vehicle is available to them
See paragraph 13.9 where this applies only for part of that time.
‘Vehicle’ below means car or van.
If private use payments or capital contributions (or both) reduce the cash equivalent of the calculation for the company car or van to nil (see Chapter 12 paragraph 12.2), a fuel benefit will still arise if the fuel is provided for private use and this is not made good (see paragraph 13.5 and 13.10).
Fuel for vehicles owned or hired by employees
13.2
Sections 62, 73 and 82
The fuel benefit charges do not apply to fuel provided for use in an employee’s own vehicle, or in a vehicle hired by the employee. The expense incurred by an employer (or another person on behalf of the employer) in providing fuel for any such vehicle is taxable upon the employee. See also Chapter 16.
The remaining paragraphs deal only with fuel provided for ‘company vehicles’.
The provision of fuel
13.3
Sections 149(3) and 160(3)
Subject to paragraph 13.5 below, a fuel benefit charge is incurred where either the:
- cost of the fuel for the ‘company vehicle’ is met either directly or indirectly by some person other than the employee (or members of their family or household)
- employee is reimbursed for the cost of any fuel used in that vehicle
Except as described in paragraph 13.12, the payment of a mileage allowance in connection with the use of a ‘company vehicle’ will normally constitute the provision of fuel.
Scope of the car and van fuel benefit charge
13.4
Sections 239(1)(2) and 269(1)
The fuel benefit charge is normally the only tax charge for the provision of fuel for private use by an employee (or members of their family or household) in a ‘company vehicle’. So the cost of fuel for private motoring reimbursed to the employee or paid on their behalf by the employer (for example, by way of credit card or a voucher) will not produce a tax liability in addition to the fuel benefit charge, unless the amount reimbursed exceeds the cost of that fuel.
If the reimbursement is excessive, the ‘profit element’ will be chargeable to tax in the normal way.
Reducing the fuel benefit charge to nil
13.5
Sections 151 and 162
For 2016 to 2017 and earlier, the fuel benefit charge is nil whenever fuel is provided for a ‘company vehicle’ and:
(a) In the year the employee is required to make good to the person providing the fuel for private motoring (including travel between home and work) the whole of the expense incurred in its provision, and in fact does so, or.
(b) Fuel is made available only for business travel.
From the 2017 to 2018 tax year the latest date for making good the cost of all fuel provided for private use when calculating the fuel benefit charge is by 6 July following the tax year in which the private fuel is provided.
On (a), see paragraphs 13.10 and 13.11 for guidance on the meaning of ‘making good’ and paragraph 13.13 on the use of HMRC advisory fuel rates in this context.
In the context of (b), see Chapter 11 paragraph 11.25 for the meaning of ‘business travel’.
Calculating the fuel benefit charge for a whole year
Cars
13.6
Sections 150
The car fuel benefit charge is calculated by multiplying 2 figures:
- a fixed sum of £24,600 for 2021 to 2022 (£24,500 for 2020 to 2021)
- the ‘appropriate percentage’ used to calculate the car benefit (see Chapter 12 paragraph 12.22 onwards)
There’s never any need to calculate a new appropriate percentage for car fuel benefit. In every case, whether or not the car has an approved CO2 emissions figure, the appropriate percentage used to calculate the car benefit charge is used to calculate the car fuel benefit charge.
For example a car powered by petrol has CO2 emissions of 160g/km which was first registered on or after 6 April 2020. The appropriate percentage used to calculate the car benefit charge for 2021 to 2022 is 36%.
The 2021 to 2022 car fuel benefit charge is £24,600 x 36% = £8,856
Vans
13.7
Sections 161
There was no van fuel benefit charge until 2005 to 2006, so any fuel provided in earlier years was covered by the van benefit charge.
For 2021 to 2022 the charge is £669 (£666 for 2020 to 2021, £655 for 2019 to 2020, £633 for 2018 to 2019).
Reducing the charge: car or van unavailable
13.8
Sections 152(1) and 163(1)
The fuel benefit charge is reduced proportionately for periods for which the ‘company vehicle’ is unavailable (see Chapter 12 paragraph 12.32 and Chapter 14 paragraph 14.11 respectively). The proportion by which the charge is reduced is the same for both the vehicle benefit and fuel benefit.
Reduction because private fuel is withdrawn
13.9
Sections 152 and 163
The fuel benefit charge is reduced if free fuel stops being provided to an employee during the tax year. This needs a decision to introduce conditions (a) or (b) in paragraph 13.5 above on a date in the year.
Any days after the provision of free fuel ceased on which the company vehicle was available are added to any days for which it was unavailable as described in paragraph 13.8. However, receiving free fuel again later in the same tax year will prevent any apportionment under this paragraph.
‘Making good’ fuel provided for private motoring
13.10
Sections 51(2) 152(2)(c) and 163(3)(c)
Where the employee needs to make good the cost of all fuel provided for private motoring in a ‘company vehicle’ as described in paragraphs 13.5 or 13.9, they may do so by:
(a) Payment — that’s by paying to the person providing the fuel a sum of money either directly or by deduction from their net salary or wages.
(b) Reinstatement — that’s by replacing the fuel provided for private use by a corresponding amount of fuel purchased from their own pocket.
(c) Any combination of (a) or (b) above.
Payment or reinstatement as outlined in (a) and (b) must be made in the tax year in which the fuel itself is provided. This applies for 2016 to 2017 and earlier years.
From the 2017 to 2018 tax year onwards payment or reinstatement as outlined in (a) and (b) must be made by 6 July following the tax year in which the fuel is provided to count as making good.
See paragraph 13.13 for how HMRC advisory fuel rates can simplify this for company cars.
13.11
The fuel benefit charge is only reduced in accordance with paragraph 13.5 or 13.9 if the employee makes good the cost of all the fuel provided for private motoring. If the employee fails to fully make good in this way, the fuel benefit charge as calculated under paragraphs 13.6 to 13.9 applies without any reduction for the repayments made by the employee.
Mileage allowance paid by the employer
13.12
Where the employer does not directly meet the cost of fuel used for business in a ‘company vehicle’ but pays the employee a business mileage allowance, no fuel benefit charge will arise if the mileage allowance does no more than meet the cost of fuel used for business travel (see Chapter 11 paragraph 11.25.
If the mileage allowance is excessive, but it’s only paid for genuine business travel, the ‘profit element’ will be chargeable to tax in the normal way.
However, a car fuel benefit charge will arise where, for instance, the payments to the employee cover travel between home and work.
See paragraph 13.13 for how HMRC advisory fuel rates can simplify this for company cars.
Advisory fuel rates (for company cars only — not applicable to vans)
13.13
For guidelines on fuel only mileage rates for company cars, see the advisory fuel rates guidance which gives details of both current and past rates.
This makes clear that there’s no obligation to use the advisory fuel rates.
Where employers want to use them, they only apply where employers:
- reimburse employees for business travel in their company cars (paragraph 13.12)
- require employees to repay the cost of fuel used for private travel in those company cars (paragraph 13.5 or 13.9)
If you pay more than advisory fuels rates and the payment is not an actual reimbursement, the excess is taxed (and subject to Class 1 National Insurance).
Advisory fuel rates do not apply to electric cars — any mileage payments should be based on actual costs incurred.
For 2018 to 2019 onwards there’s an advisory electric rate for company cars. For more information see the advisory fuel rates guidance.
Optional remuneration arrangements
13.14
Section 149A
From 6 April 2017 where the fuel benefit is provided as part of optional remuneration arrangements the amount of the benefit treated as earnings from the employment is the greater of the:
- value of the benefit worked out under the normal rules (ignoring any amount made good)
- amount of any salary or cash pay foregone
There’s more guidance about optional remuneration arrangements in Appendix 12.
Exemption for workplace charging of electric and plug-in hybrid vehicles
13.15
Section S237A
From 6 April 2018, where an individual is provided with workplace facilities for charging a battery of a vehicle used by them (including as a passenger), no taxable benefit arises for costs relating to the provision of electricity at those facilities if certain conditions are met.
The conditions are:
- the charging facilities must be provided at or near an employee’s workplace
- charging must be available to either all the employer’s employees generally, or all the employer’s employees generally at the employee’s workplace
- charging facilities must be for a battery of a vehicle in which the employee is either the driver or a passenger
The benefit will remain taxable if it’s offered in conjunction with an optional remuneration arrangement. See Appendix 12.
Last updated 10 May 2021 + show all updates
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The fuel benefit charges at sections 13.6 and 13.7 have been updated.
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First published.