Company funded fuel and HMRC's rules
Discussion
Evening all.
Having recently done the sums which lead to me opting out of employer funded private fuel I was curious as to whether any more tax conscious folk than myself had a view on the current rules.
I drive approximately 18000 miles a year, all private (a big chunk is to/from office). My company car has a CO2 rating of 109 and an official combined MPG figure of 67mpg. I the real world I see 50mpg without too much effort.
For the tax calculation, HMRC assume that the car achieves 40mpg (versus the official figure of 67mpg). Very roughly at 19000 miles a year I break even but based upon what the car really delivers, I need to be exceeding 24000 miles a year to actually derive a benefit, from my benefit. At 40mpg, its approx. 19000 miles a year, all personal miles.
My immediate thoughts:
Having recently done the sums which lead to me opting out of employer funded private fuel I was curious as to whether any more tax conscious folk than myself had a view on the current rules.
I drive approximately 18000 miles a year, all private (a big chunk is to/from office). My company car has a CO2 rating of 109 and an official combined MPG figure of 67mpg. I the real world I see 50mpg without too much effort.
For the tax calculation, HMRC assume that the car achieves 40mpg (versus the official figure of 67mpg). Very roughly at 19000 miles a year I break even but based upon what the car really delivers, I need to be exceeding 24000 miles a year to actually derive a benefit, from my benefit. At 40mpg, its approx. 19000 miles a year, all personal miles.
My immediate thoughts:
- 1: Why can HMRC not use the official fuel consumption figures that are sanctioned by the government as suitable vehicle purchasing guidance for the general public? 40 versus 67 suggested they know the official numbers are absolutely ludicrous. Vehicle specific CO2 is used in the calc so it isn't clear why vehicle specific MPG is easily ignored.
- 2: When doing an already above average private mileage, why is it impossible to derive a personal benefit, from an employer provided benefit? Taking healthcare as an example, you pay 40% against the value of the policy, so you actually realise a tangible benefit. You would think that for fuel, based upon an average private mileage, you would pay approx. 40% of the value of the fuel based upon that mileage.
I think you're misunderstanding the way the fuel benefit's worked out.
It's not on any fuel economy figure, it's on CO2 (or, rather, the %age modifier based on it). Multiply £23,400 by the %age - for 109g, that's 22% for this tax year, £5,148 (25% next year), and you pay your income tax rate on that.
An economy figure is merely used in some calculators to give you an approximate break-even point.
It's not on any fuel economy figure, it's on CO2 (or, rather, the %age modifier based on it). Multiply £23,400 by the %age - for 109g, that's 22% for this tax year, £5,148 (25% next year), and you pay your income tax rate on that.
An economy figure is merely used in some calculators to give you an approximate break-even point.
TooMany2cvs said:
I think you're misunderstanding the way the fuel benefit's worked out.
It's not on any fuel economy figure, it's on CO2 (or, rather, the %age modifier based on it). Multiply £23,400 by the %age - for 109g, that's 22% for this tax year, £5,148 (25% next year), and you pay your income tax rate on that.
An economy figure is merely used in some calculators to give you an approximate break-even point.
Thanks - you are certainly correct, I was using a calculator when I saw the 40mpg reference. Corrected! What is the 23,400 based upon then?It's not on any fuel economy figure, it's on CO2 (or, rather, the %age modifier based on it). Multiply £23,400 by the %age - for 109g, that's 22% for this tax year, £5,148 (25% next year), and you pay your income tax rate on that.
An economy figure is merely used in some calculators to give you an approximate break-even point.
TooMany2cvs said:
Jag_NE said:
Why is 23400 the nominal though?
Just because it is... That's what the value of the benefit - for everybody - is deemed to be calculated from.TooMany2cvs said:
Jag_NE said:
I need to do approx twice the average personal miles to derive an actual benefit from my employer provided benefit.
Then it's cheaper for you to turn the benefit down and pay for your own fuel... How's that a scam?Jag_NE said:
TooMany2cvs said:
Jag_NE said:
I need to do approx twice the average personal miles to derive an actual benefit from my employer provided benefit.
Then it's cheaper for you to turn the benefit down and pay for your own fuel... How's that a scam?Or change jobs.
Jag_NE said:
If you note I’m running 18,000 miles a year, which is above average, I derive zero “benefit” from the benefit, it’s essentially taxed at 100%. How on earth is that fair?
In my old company we used to get people saying that the tax on the car itself was unfair as they "never" used the car privately. It's swings and roundabouts I suppose - there will be some people making out like bandits by doing huge private mileages - we had one guy doing 50K/yr (that's 50K private miles).
I don't know if there's a specific agenda behind the current fuel taxation method but it could well be done to discourage employer provided fuel.
TooMany2cvs said:
Jag_NE said:
It’s not my employer who sets the seemingly very unfair rules.
How are they "very unfair", if they apply equally to everybody?Phone the Chancellor of the Exchequer, and ask him to change the tax rules just to be nicer to you. Let us know what he says.
Jag_NE said:
TooMany2cvs said:
Jag_NE said:
It’s not my employer who sets the seemingly very unfair rules.
How are they "very unfair", if they apply equally to everybody?Phone the Chancellor of the Exchequer, and ask him to change the tax rules just to be nicer to you. Let us know what he says.
If you don't want the 'free' fuel, opt out of the private fuel 'benefit' and pay the company back the actual fuel you use for the private mileage you do. ie if you do 18,000 miles a year and only 1,800 is private, you pay the company back 10% of the total cost of fuel put in the car. Still a benefit, you get to use the car for only the cost of fuel and no other maintenance cost.
I have a company car (for another week) and I used to take the 'free' fuel and pay the income tax on it but lately it's getting silly and you need to be doing HUGE private miles to justify it. I therefore swapped to biz miles fuel only and I pay back a fee (circa 10.3p/mile) for all my private miles I do. Works fine.
A900ss said:
Jag_NE said:
TooMany2cvs said:
Jag_NE said:
It’s not my employer who sets the seemingly very unfair rules.
How are they "very unfair", if they apply equally to everybody?Phone the Chancellor of the Exchequer, and ask him to change the tax rules just to be nicer to you. Let us know what he says.
If you don't want the 'free' fuel, opt out of the private fuel 'benefit' and pay the company back the actual fuel you use for the private mileage you do. ie if you do 18,000 miles a year and only 1,800 is private, you pay the company back 10% of the total cost of fuel put in the car. Still a benefit, you get to use the car for only the cost of fuel and no other maintenance cost.
I have a company car (for another week) and I used to take the 'free' fuel and pay the income tax on it but lately it's getting silly and you need to be doing HUGE private miles to justify it. I therefore swapped to biz miles fuel only and I pay back a fee (circa 10.3p/mile) for all my private miles I do. Works fine.
Sheepshanks said:
Shhhh!
Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Healthcare (and pensions) do reduce the governments cost for repairing you/funding the older you, so they are quite good tax things. Fuel isn’t really is it. And as a previous poster said, you could do 50,000 private miles and you’d be quids in. You don’t so you’re not. Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Opt out of the fuel and you are still getting a good deal as you can’t run a comparable car for company car BIK and just the fuel for the private miles.
Try to not think of the word ‘benefit’.
A900ss said:
Sheepshanks said:
Shhhh!
Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Healthcare (and pensions) do reduce the governments cost for repairing you/funding the older you, so they are quite good tax things. Fuel isn’t really is it. And as a previous poster said, you could do 50,000 private miles and you’d be quids in. You don’t so you’re not. Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Opt out of the fuel and you are still getting a good deal as you can’t run a comparable car for company car BIK and just the fuel for the private miles.
Try to not think of the word ‘benefit’.
A900ss said:
Sheepshanks said:
Shhhh!
Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Healthcare (and pensions) do reduce the governments cost for repairing you/funding the older you, so they are quite good tax things. Fuel isn’t really is it. And as a previous poster said, you could do 50,000 private miles and you’d be quids in. You don’t so you’re not. Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
Opt out of the fuel and you are still getting a good deal as you can’t run a comparable car for company car BIK and just the fuel for the private miles.
Try to not think of the word ‘benefit’.
Sheepshanks said:
Jag_NE said:
My other personal example is private healthcare. Keeping the numbers round, for an annual policy valued at 1k, hmrc tax me £400 but I receive a genuine benefit in that I get the coverage for far less than if I had to go out and buy it.
Shhhh!Though it's odd how you're not complaining that it's not fair (to everyone else) that you can get cheaper private health care.
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