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HMRC internal manual

Employment Income Manual

Car benefit: special cases: employees with frequent changes of car (from 2009/10): car fuel benefit

The car fuel benefit legislation applies to employees with cars subject to averaging as it does to all others. There is an index to the guidance on car fuel benefit at EIM25500.

Employers who operate car dealerships inevitably provide fuel for their cars, e.g. for demonstration drives. It follows that in such cases the car fuel benefit charge has been incurred if the car is available for private use. In all other situations within the scope of this guidance, fuel is also provided for the car unless the employee personally buys for all fuel (business or private) and is not reimbursed for any of it. Simply using fuel already in a car and not replacing it constitutes using fuel which has been provided for the car.

Employers providing private fuel

Employers may choose to provide private fuel to some or all employees. They should complete P11D accordingly, using the appropriate percentage for the notional car as determined at EIM23850 (also see example at EIM23870).

Employers NOT providing private fuel

Employers who choose NOT to provide private fuel to an employee (and therefore believe that the car fuel benefit charge should be nil) must recognise that the legal onus is on them to demonstrate that the statutory conditions at EIM25555 are met. They need to be able to prove that, in the tax year, the employee was required to make good the full cost of any fuel used privately on the basis that private mileage was all done in the notional car, and that they have actually done so.

The advisory fuel rates can be used for this purpose, as described at EIM25655; it will be necessary to calculate the engine size of the notional car if this option is chosen.

If they cannot, the full charge (calculated as in EIM25560) applies.

Accounting for VAT on the private use of fuel.

These arrangements apply only for income tax and NICs. They do not affect how VAT is accounted for on any private fuel (see Notice 718 and V1-13 Chapter 19).

2008/09 and earlier years

This guidance applies only for 2009/10 and later years. Local arrangements applied for years to 2008/09 as described at EIM23750 onwards.