Fuel scale charges and fuel benefit-in-kind


We are so accustomed to rising motor taxes that it was a nice surprise to see the VAT fuel scale charges (in respect of petrol and diesel supplied for private motoring) decrease for return periods. This reduction is to commence on or after 1 May 2014 and follows the recent reductions in the price of petrol and diesel.

The new quarterly charges range from £156 a quarter (inclusive of £26 output tax) for a car emitting 120g per km or less to £548 (£91.33 output VAT) for cars emitting 225g/km CO2.

Remember that unless the director / employee fully reimburses the employer for private fuel, the appropriate amount for the company car should be shown as output tax for the return period. A credit entry made to motor expenses should be made in the business accounts.


In addition to the benefit in kind charged on directors and employees who are provided with a car for private use, there is a further taxable benefit should their petrol or diesel be paid for in respect of private journeys. Like the car benefit, the fuel scale charge is based on the official CO2 emissions percentage for that vehicle, multiplied by a notional list price of £21,100 for 2013/14 and £21,700 for 2014/15.

The P11d benefit for 2013/14 for a director driving a diesel car with emissions of 125g/km would be 20% (17% plus 3% for diesel) multiplied by £21,100, regardless of the actual list price of the vehicle = £4,220. This benefit in kind applies unless there is full reimbursement of private fuel, generally by the end of the tax year. HMRC suggest that their advisory fuel rates, now published every 3 months, should be used for this purpose.

A higher rate taxpayer would pay £1,688 income tax (at 40%) on this benefit, and using a reimbursement rate of 14p per mile would need to drive 12,057 miles to make paid-for private fuel beneficial. The employer would also have to pay Class 1A national insurance at 13.8% on the £4,220. There are also VAT implications.

You Barnes Roffe partner will be happy to help if you need any advice on motoring and fuel.

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