One consequence of the recent periods of lockdown is that employees may have driven fewer private miles in their company cars, particularly where they have not been driving to the office.
If they are to avoid being taxed on the provision of private fuel they need to fully reimburse their employer for the cost of private fuel by 6 July 2021 for the 2020/21 tax year. If not the benefit needs to be reported on the employee’s form P11d for 2020/21.
Note that the CO2 emissions percentage for the car is multiplied by the £24,500 notional list price used to calculate the benefit for 2020/21. For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,065 for 2020/21. If they are a higher rate taxpayer that would mean £3,626 tax. That would be an awful lot of private fuel!
In addition to the tax payable by the director on the provision of private fuel there would be £1,251 Class 1A national insurance contributions payable by the employer.
Note that the private fuel benefit is an all or nothing benefit. There must be full reimbursement by 6 July 2021 to eliminate the benefit. The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle which is amended every 3 months.
Advisory fuel rates from 1 June 2021
These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2021. Where there has been a change the previous rate is shown in brackets.
|1400cc or less||11p (10p)||8p (7p)|
|1600cc or less||9p|
|1401cc to 2000cc||13p (12p)||9p (8p)|
|1601 to 2000cc||11p|
|Over 2000cc||19p (18p)||13p (12p)||14p (12p)|
Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.
For earlier quarterly figures see: Advisory fuel rates – GOV.UK (www.gov.uk)
Recovery of Input VAT on Employee Fuel
These HMRC advisory fuel rates may also be used to calculate input VAT that may be claimed by the employer where an employee uses their own car for business journeys. The tax-free reimbursement amount continues to be 45p per mile (plus 5p per passenger) so for an 1800 cc diesel car 11p of the 45p is deemed to be diesel and 20/120 of that amount, 1.83 pence per mile, may be reclaimed by the employer-provided there are petrol station receipts to cover the amounts claimed.
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