Employee Benefits

The easiest way to ensure that no car-fuel benefit charge (for private journeys in a company car) is payable, is to use the advisory fuel rates published by HMRC to repay any private fuel costs to your employer. The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly.

However, the car-fuel benefit charge will still be payable if it cannot be demonstrated to HMRC that the driver of the car has paid for all fuel used for private journeys, this includes commuting to and from work. To ensure that this does not occur employees will need to keep a log of private mileage.

The latest advisory fuel rates became effective on 1 December 2018. Fuel rates are reviewed four times a year with changes taking effect on 1 March, 1 June, 1 September and 1 December.

Action to take before 5 April 2019

If you have a company car and your employer pays for all your petrol you will need to work out your actual private mileage for 2018-19, multiply this by the appropriate advisory fuel rate, and pay this amount to your employer.

This will avoid being charged the expensive car-fuel benefit – in most cases the tax saved will be more than the amount of your repayment to the employer.

If in doubt, give us a call and we will help you crunch the numbers. 

There is no requirement to report certain routine expenses to HMRC. The types of expenses and benefits covered are referred to as exemptions and have replaced dispensations which no longer apply.

The business expenses and benefits that do not need to be reported (since April 2016) include: reimbursed costs to employees covering business travel, phone bills, business entertainment expenses and uniforms and tools for work. As an alternative to reimbursing the employee for actual costs incurred, HMRC’s benchmark rates or a special bespoke rate may be used. Employers only need apply for an exemption if they want to use a bespoke rate which needs to be approved by HMRC. Employers that agreed dispensations using bespoke rates prior to 6 April 2016 can continue using the bespoke rates for up to 5 years from the date they were agreed.

Employers must also ensure that they have a checking system in place to ensure that employees are making valid expenses claims. This requirement is usually satisfied by asking employees to submit or retain receipts as evidence of a valid expense claim. HMRC is clear that employees aren’t allowed to check their own expenses and that someone else within the company must be responsible to ensure a claim is legitimate.

Advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly. The rates can be used by employers who reimburse employees for business travel in their company cars or where employees are required to repay the cost of fuel used for private travel. HMRC accepts there is no taxable profit and no Class 1A National Insurance on reimbursed travel expenses where employers pay a rate per mile for business travel no higher than the published advisory fuel rates.

Employees can also use the advisory fuel rates to repay the cost of fuel used for private travel. In this case, HMRC will accept there’s no fuel benefit charge. The advisory rates are not binding if you the employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

The latest advisory fuel rates become effective on 1 December 2018. Fuel rates are reviewed four times a year with changes taking effect on 1 March, 1 June, 1 September and 1 December. You can use the previous rates for up to 1 month from the date the new rates apply.

The rates are as follows:

Engine size	Petrol – amount per mile	LPG – amount per mile
1400cc or less	12p	8p
1401cc to 2000cc	15p	10p
Over 2000cc	22p	15p

 

Engine size	Diesel – amount per mile
1600cc or smaller	10p
1601cc to 2000cc	12p
Over 2000cc	14p

   
Hybrid cars are treated as either petrol or diesel cars for this purpose.

Advisory Electricity Rate

HMRC now accepts that if you pay up to 4p per mile when reimbursing your employees for business travel in a fully electric company car there is no profit. While electricity is not considered a fuel for tax and NICs purposes, the Advisory Electricity Rate will be published quarterly alongside the other advisory fuel rates.