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HMRC internal manual

National Insurance Manual

IM06053 Class 1 NICs: Expenses and Allowances: Fuel: Liability for NICs on fuel

General liability for NICs

NIM06052 lists the different methods by which an employer may provide fuel to hisemployees.

Liability for NICs on fuel will depend upon

  • the action taken by the employee prior to the purchase of the fuel and
  • the arrangements that an employer has put in place to allow an employee to purchase the fuel on his behalf
  • the method of provision of the fuel.

The general rule about NICs liability is that if an employer pays for fuel used by hisemployees and

  • the fuel is used for private mileage or
  • the payment the employee receives exceeds the actual cost of the business expense incurred

a NICs liability will arise.

Payments made before 6 April 2002 - Liability for Class 1 NICs

Where the cost of the fuel is met by the employer

  • reimbursing the employee’s fuel bills
  • paying a cash allowance
  • paying a round sum allowance
  • paying a mileage rate
  • providing a non-cash voucher for fuel
  • supplying a fuel agency card or credit card to allow the employee to purchase fuel where the employee is not acting on the employer’s behalf when purchasing fuel (see NIM06054)
  • allowing an employee to charge the fuel to an employer’s garage account where the employee is not acting on the employer’s behalf when purchasing fuel (see NIM06054)

the full cost of all private fuel and any amount which exceeds the actual businessexpenses of using the car for business travel, must be added to any other earnings paid inthe same earnings period when calculating Class 1 NICs liability.

For guidance on:

  • identifying business expenses, see NIM05020
  • acceptable mileage rates, see NIM05700
  • a non-cash voucher for fuel which can be disregarded for Class 1 NICs purposes, see NIM02416.

Payments made on or after 6 April 2002 - Liability for Class 1 NICs

When calculating Class 1 NICs liability you will need to consider the effect of thestatutory scheme for dealing with NICs liability on motoring expenses paid to employeesusing their own vehicles for business travel. See NIM05800 forguidance about the scheme.

Liability for Class 1A NICs

Where the employer provides fuel by means of a payment or benefit in kind, for example

  • direct from his own fuel pump
  • employee uses an employer’s fuel agency card, credit card or debit card to purchase fuel on the employer’s behalf, see NIM06054,
  • employee acts on his employer’s behalf when he charges fuel to his employer’s garage account

Class 1A NICs will be due on the full cost of the fuel unless all of the fuel is usedfor business purposes. For further guidance on Class 1A NICs on fuel:

  • NIM16170 where a car is privately owned
  • NIM16175 where the employee is provided with a car.