Discussion
I'm trying to get my head around some personal tax implications, not for me but for a friend and can't really find anything sensible on line about it.
I think it's pretty straight forward if the employee gets given a car and all their fuel (Business and Private) paid for;
Employee A
- Gets given BMW X5 3 Litre M Sport RRP £54,000 Co2s 158
- BiK on Car £54,000 x 31% = £16,740 reduced personal allowance @ 40% Tax = £6,696 cost to employee.
- BiK on Private Fuel with CO2s of 158 = £6,882 reduced personal allowance @ 40% Tax = £2,753 cost to employee.
However how does this work when the employee isn't given a company car but an increased salary to run their own car and has all their fuel (Business and Private) paid for.
The friend is being lead to believe that it works as follows;
Employee B
- The increased salary is a straight tax on income, so assume £1,000 per month which is £12,000 @ 40% tax = £4,800 cost to employee (plus obviously they have to pay to run a car)
- The fuel is not taxed as BiK as it's not associated to any specific car, but calculated as additional salary.
- So assuming 500 private miles a week for 45 weeks per year @ £0.15 per mile = salary of £3,375 @ 40% Tax = £1,350 cost to employee.
Is this right?
I think it's pretty straight forward if the employee gets given a car and all their fuel (Business and Private) paid for;
Employee A
- Gets given BMW X5 3 Litre M Sport RRP £54,000 Co2s 158
- BiK on Car £54,000 x 31% = £16,740 reduced personal allowance @ 40% Tax = £6,696 cost to employee.
- BiK on Private Fuel with CO2s of 158 = £6,882 reduced personal allowance @ 40% Tax = £2,753 cost to employee.
However how does this work when the employee isn't given a company car but an increased salary to run their own car and has all their fuel (Business and Private) paid for.
The friend is being lead to believe that it works as follows;
Employee B
- The increased salary is a straight tax on income, so assume £1,000 per month which is £12,000 @ 40% tax = £4,800 cost to employee (plus obviously they have to pay to run a car)
- The fuel is not taxed as BiK as it's not associated to any specific car, but calculated as additional salary.
- So assuming 500 private miles a week for 45 weeks per year @ £0.15 per mile = salary of £3,375 @ 40% Tax = £1,350 cost to employee.
Is this right?
http://comcar.co.uk/fuel/benefit/
My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
halo34 said:
http://comcar.co.uk/fuel/benefit/
My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
On the link you provided the bottom paragraph says;My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
Who this applies to?
Fuel benefit can only apply to drivers of a vehicle supplied by their employer.
Van drivers should look at the rules on vantax.co.uk.
If a driver of their own vehicle gets fuel provided for private use (usually via a fully expensed fuelcard) the private element will be taxed as though it was net salary.
Which I think confirms that it's not a Bik but salary, but still can't find this clarification on an HMRC site!
It would depend on how the amount is declared to HMRC. If treated as a simple extra salary amount, then it would be incorporated into the payroll run for the employee each week/month. They would therefore pay the correct tax and NI as they go.
Alternatively, the employer could wait until the end of the tax year and then disclose the amount paid in the tax year to the employee in regards to private fuel as a figure on the P11D form. HMRC would then take that information and adjust the employees PAYE tax coding for the next tax year.
Alternatively, the employer could wait until the end of the tax year and then disclose the amount paid in the tax year to the employee in regards to private fuel as a figure on the P11D form. HMRC would then take that information and adjust the employees PAYE tax coding for the next tax year.
Marcellus said:
halo34 said:
http://comcar.co.uk/fuel/benefit/
My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
On the link you provided the bottom paragraph says;My understand is that it is BIK - but I get a fuel card so the method of claim may differ.
Who this applies to?
Fuel benefit can only apply to drivers of a vehicle supplied by their employer.
Van drivers should look at the rules on vantax.co.uk.
If a driver of their own vehicle gets fuel provided for private use (usually via a fully expensed fuelcard) the private element will be taxed as though it was net salary.
Which I think confirms that it's not a Bik but salary, but still can't find this clarification on an HMRC site!
We had salary increase for car allowance, and initially we had fuel cards and the amount we spent on fuel appeared on our P11D (it was all private use) and was taxed as income.
When the company ownership changed, the fuel cards disappeared - we had to submit expenses for our fuel receipts but the net result was basically the same - we got paid the expenses back monthly, and the total appeared on our P11D and was taxed as income.
Marcellus said:
Thanks Dave and Eric, is the amount also liable to NI contributions?
I guess not. When ours were done as expenses, we got the full amount back that we spent each month - and then at the end of the year, those figures on the P11D go into the tax return and I ended up with a tax bill.There is one element not being discussed here which the OP may not be aware of:
If the driver is only being paid fuel for business use and no other payment for running the car, (and you suggest that this fuel is equivalent to a rate of 15p/mile), then the tax difference between the Governments milage rates of 45p/mile for upto 10,000 mpa 25p/mile for each mile above can be claimed back.
so eg if they do 15000 business miles then they are due under HMRC rates 10000*45p plus 5000*25p = £5750 of mileage claim. But they are only receiving from the employee the fuel which is equivalent to 15000 miles @15p per mile - ie £2250 pa. This difference is £3500 and (in this example) would more than balance out the private miles BIK benefit which you calculate at £3375.
If the driver is only being paid fuel for business use and no other payment for running the car, (and you suggest that this fuel is equivalent to a rate of 15p/mile), then the tax difference between the Governments milage rates of 45p/mile for upto 10,000 mpa 25p/mile for each mile above can be claimed back.
so eg if they do 15000 business miles then they are due under HMRC rates 10000*45p plus 5000*25p = £5750 of mileage claim. But they are only receiving from the employee the fuel which is equivalent to 15000 miles @15p per mile - ie £2250 pa. This difference is £3500 and (in this example) would more than balance out the private miles BIK benefit which you calculate at £3375.
Dave_newcastle said:
There is one element not being discussed here which the OP may not be aware of:
If the driver is only being paid fuel for business use and no other payment for running the car, (and you suggest that this fuel is equivalent to a rate of 15p/mile), then the tax difference between the Governments milage rates of 45p/mile for upto 10,000 mpa 25p/mile for each mile above can be claimed back.
so eg if they do 15000 business miles then they are due under HMRC rates 10000*45p plus 5000*25p = £5750 of mileage claim. But they are only receiving from the employee the fuel which is equivalent to 15000 miles @15p per mile - ie £2250 pa. This difference is £3500 and (in this example) would more than balance out the private miles BIK benefit which you calculate at £3375.
Yes aware of that, but as the employee isn't being re-reimbursed for any fuel it's not applicable.....If the driver is only being paid fuel for business use and no other payment for running the car, (and you suggest that this fuel is equivalent to a rate of 15p/mile), then the tax difference between the Governments milage rates of 45p/mile for upto 10,000 mpa 25p/mile for each mile above can be claimed back.
so eg if they do 15000 business miles then they are due under HMRC rates 10000*45p plus 5000*25p = £5750 of mileage claim. But they are only receiving from the employee the fuel which is equivalent to 15000 miles @15p per mile - ie £2250 pa. This difference is £3500 and (in this example) would more than balance out the private miles BIK benefit which you calculate at £3375.
Running through the numbers of all the options, even though they don't actually have a choice, for the employee being taxed on the private fuel used as income is actually the most beneficial.
Marcellus said:
Yes aware of that, but as the employee isn't being re-reimbursed for any fuel it's not applicable.....
Running through the numbers of all the options, even though they don't actually have a choice, for the employee being taxed on the private fuel used as income is actually the most beneficial.
Yeah, it worked for me and it was a benefit I was sad to lose when I changed jobs. On the other hand, the downside was that I effectively had to pay for a years worth of petrol in one go and getting a "petrol" bill of a couple of thousand pounds tended to be a bit depressing, even if it was only 40% of what I'd spent over the year!Running through the numbers of all the options, even though they don't actually have a choice, for the employee being taxed on the private fuel used as income is actually the most beneficial.
Marcellus said:
- So assuming 500 private miles a week for 45 weeks per year @ £0.15 per mile...
Is it paid as x pence per mile or just reimbursed at actual cost of fuel purchased?Marcellus said:
Yes aware of that, but as the employee isn't being re-reimbursed for any fuel it's not applicable.....
You've lost me now - I thought all their fuel cost was being re-reimbursed?It doesn't matter anyway - if they use their own car for business mileage they can reclaim from HMRC.
davek_964 said:
Yeah, it worked for me and it was a benefit I was sad to lose when I changed jobs. On the other hand, the downside was that I effectively had to pay for a years worth of petrol in one go and getting a "petrol" bill of a couple of thousand pounds tended to be a bit depressing, even if it was only 40% of what I'd spent over the year!
yes I think putting the cash away each month will be key, especially with a return trip of 200miles home to office, fortunalety it's not a daily trip!Marcellus said:
Yes aware of that, but as the employee isn't being re-reimbursed for any fuel it's not applicable.....
You are confusing me and countering your own question to us all- you sated at the beginning that the employee was being reimbursed for all fuel, both private and business.If the employee was receiving 15p/mile for business miles then what I say regarding claiming back the difference between HMRC rates is relevant and is a huge benefit to the employee. You say that the employee is to be paid the fuel back at the fuel cost and this equates to 15p/mile - this is the difference that needs to be explored with HMRC - call their helpline and ask them.
Dave_newcastle said:
You are confusing me and countering your own question to us all- you sated at the beginning that the employee was being reimbursed for all fuel, both private and business.
If the employee was receiving 15p/mile for business miles then what I say regarding claiming back the difference between HMRC rates is relevant and is a huge benefit to the employee. You say that the employee is to be paid the fuel back at the fuel cost and this equates to 15p/mile - this is the difference that needs to be explored with HMRC - call their helpline and ask them.
No, I said employee has all their fuel paid for, not that they pay it and have it reimbursed, the two are very different!If the employee was receiving 15p/mile for business miles then what I say regarding claiming back the difference between HMRC rates is relevant and is a huge benefit to the employee. You say that the employee is to be paid the fuel back at the fuel cost and this equates to 15p/mile - this is the difference that needs to be explored with HMRC - call their helpline and ask them.
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