3 Mins
Employers should be aware of the potential tax implications of paying fuel costs/mileage to staff.
Where employees are required to travel from to a temporary worksite, payments towards the fuel costs could have a Benefit in Kind (BIK) (P11D) implication depending on the nature and/or level of the payment which have been summarised below:
Company Vehicle
| Scenario | Benefit | Reportable on a P11D or via Payroll |
|---|---|---|
| Employer pays all fuel costs with no restriction for private miles (includes home to the employees normal place of work) | Employee Benefit | Reportable on the employees P11D. The value of the benefit is subject to Class 1A (employer) NIC |
| Employer pays all fuel costs but employee reimburses for private miles at the advisory fuel rate levels (these are updated quarterly) | No benefit | Not reportable on the P11D or via Payroll |
| Employee pays all fuel costs and employer pays more than the advisory fuel rate for business miles | Employee benefit | If the cost of business travel is higher than the guideline rates, you can use your own rates to reflect your situation. However, if you cannot prove the fuel cost per mile is higher than the guideline rates, the excess is treated as taxable income for the employee subject to PAYE and also as earnings for Class 1 National Insurance purposes (employer and employee). |
Employee’s personal vehicle
| Scenario | Benefit | Reportable on a P11D or via Payroll |
|---|---|---|
| Employer pays all fuel costs with no restriction for private miles (includes home to the employee’s normal place of work) | Employee Benefit | Reported via payroll on which tax and Class 1 NIC is deducted. The employee can claim for business miles separately |
| Employer pays all fuel costs but employee reimburses for private miles at the Approved Mileage Allowance (MAP) (currently 45p for the first 10,000 miles, 25p thereafter) | No benefit | Not reportable on the P11D or via Payroll |
| Employee pays all fuel costs and employer pays more than the MAP | Employee benefit | Excess is reported on the P11D with the employee paying tax via self assessment or as an adjustment to their coding notice. However the Class 1 NIC (Employer and Employer) is dealt with via payroll |
Businesses should be aware of these rules prior to any payment for travel as well as the fact that HMRC deem home to office travel as normal commuting not business travel.
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Richard McPhee
I joined Henderson Loggie in 2005 and have specialised in both personal and corporation tax. I am an ATT (Association of Taxation Technicians) qualified manager, and since 2017 I have managed corporate clients exclusively. I…