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HMRC internal manual

Employment Income Manual

Car fuel benefit: replaces other tax liabilities

Sections 239 and 269 ITEPA 2003

The car fuel benefit charge replaces any tax liability that would otherwise arise in respect of fuel supplied for a car for which a car benefit charge is incurred (see EIM23015).

Thus, a tax charge does not arise in addition to the car fuel benefit charge where:

  • the employer (or another person acting on the employer’s behalf) settles a debt incurred for fuel for the car, or
  • the fuel is obtained for the car by means of vouchers or by way of a credit card provided by reason of the employment, or
  • the employer reimburses the cost of fuel for private use.

Reimbursements for the cost of fuel for private use which are taxed under PAYE

Employers have been known to:

  • reimburse employees for the cost of private fuel
  • and subject the reimbursement to tax under PAYE,
  • then claim that the fuel benefit charge does not apply because the reimbursement was taxed.

This is not correct. The legislation specifically prevents any liability to tax (other than the fuel benefit charge) arising in respect of payments for private fuel. That being the case, it cannot be correct to subject the reimbursements to PAYE, nor can doing so affect the correct tax treatment, which is that:

  • the fuel benefit charge is imposed and
  • the reimbursements themselves are not subject to tax (except, of course, if they are greater than the cost the employee has incurred, in which case the excess is chargeable as cash earnings).

Years prior to 2003/04

The fuel benefit charge had a different basis in these years.