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HMRC internal manual

Employment Income Manual

Optional remuneration arrangements: van fuel made available for private use

Section 160A ITEPA 2003

From 6 April 2017, the Income Tax and NICs advantages where benefits are provided through arrangements in which the employee gives up the right to an amount of earnings in return for a benefit are largely withdrawn. Guidance on optional remuneration arrangements from 6 April 2017 starts at EIM44000.

Transitional provisions apply for a limited period. For further details see EIM44030.

Certain benefits in kind are excluded from the changes. For further details see EIM44130.

Where fuel for a van is made available to an employee who is chargeable to tax in respect of a van in the tax year under an optional remuneration arrangement, the relevant amount to treat as earnings from the employment is the greater of:

  • the cash equivalent of the benefit of the fuel, and
  • the amount foregone with respect to the benefit of the fuel

Where it’s necessary to apportion an amount of earnings to the benefit charge on the provision of fuel under an optional remuneration arrangement, the apportionment should be made on a just and reasonable basis.

No deduction is given from the relevant amount in respect of the fuel benefit for any private use payments.

Example

The employee in the example in EIM44090 also has fuel made available to him, and under an optional remuneration arrangement he gives up £60 per month as a payment towards his private use. The cash equivalent of the benefit of the fuel is £610, whilst the amount foregone with respect to the benefit of the fuel is £720 (£60 × 12). As the amount foregone is the greater of the two sums, this will be the amount to treat as earnings.