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HMRC internal manual

Employment Income Manual

Car fuel benefit: fares allowances paid under working rule agreements in the building, civil engineering and electrical contracting industries

Problems sometimes arise with fares allowances paid under working rule agreements for hourly-paid manual workers and similar agreements for staff employees.

Fares allowances paid under these agreements effectively reimburse employees for various travelling expenses. The agreements differ but the allowances often cover most of the cost of ordinary commuting journeys.

Only part of the allowance is taxed. This is usually based on the allowance paid for an agreed mileage from the home, which is treated as being ordinary commuting. Thus, for each employee, part of the allowance covering home to work travel may be taxed and part may not.

If an employer meets the cost of supplying fuel used in a provided car by paying a travel allowance to an employee who is not in an excluded employment, the full amount of the car fuel benefit charge applies unless:

  • the allowance does no more than cover the cost of fuel used for business travel, or
  • that part of the fares allowance covering private use is made good to the employer (see EIM25650).

Use the travelling expenses rules in Sections 337 and 338 ITEPA 2003 to test the extent of business travel (see EIM31805 onwards). The mere fact that part of a fares allowance covering home to work trips is not taxed does not mean that those journeys count as business travel.