Where an employee with a company car is provided with fuel for their own private use by their employer, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car, applied to the car fuel benefit multiplier, currently £24,500.
The car fuel benefit charge is not applicable when the employee pays for all their private fuel. This is known as ‘making good’. Private fuel includes the fuel used commuting to and from work. Employees should keep a log of private mileage and use the published advisory fuel rates to repay the cost of fuel used for private travel. The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly.
If private fuel costs are repaid to the employer, HMRC will accept that there is no car fuel benefit charge. It will usually be cheaper to repay your employer for private fuel than to pay the Income Tax charge, especially if private mileage is relatively low.
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 and ensure that they make good the cost of all fuel provided for private use.
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