Another consequence of the lockdown periods is that employees may have driven fewer private miles in their company cars, particularly where they have not been driving to the office.

If they are to avoid being taxed on the provision of private fuel they need to fully reimburse their employer for the cost of private fuel by 6 July 2021 for the 2020/21 tax year.

Note that the CO2 emissions percentage for the car is multiplied by the £24,500 notional list price used to calculate the benefit. For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9065 for 2020/21. If they are a higher rate taxpayer then that means £3,626 tax. That would be an awful lot of private fuel!

 

Private fuel benefit all or nothing

In addition to the tax payable by the director on the provision of private fuel there would be £1251 Class 1A national insurance contributions payable by the employer.

Note that the private fuel benefit is an all or nothing benefit. There must be full reimbursement by 6 July to eliminate the benefit. The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle.

 

Advisory fuel rate for company cars

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2021.

Where there has been a change the previous rate is shown in brackets.

Engine Size Petrol Diesel LPG
1400cc or less 11p

(10p)

8p

(7p)

1600cc or less 9p

 

1401cc to 2000cc 13p

(12p)

 

9p

(8p)

1601 to 2000cc 11p

 

Over 2000cc 19p

(18p)

13p

(12p)

14p

(12p)

 

Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

 

Get in touch to discuss your existing employee benefit arrangement and see how we could save you money.

 

Related services:

Corporate tax services

Personal tax services

VAT