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Guide
Car Fuel Allowance
Find out all you need to know about car fuel allowance as an employer. From car fuel reimbursement rates, the differences between company cars and car allowance, benefit-in-kind tax and more!
Employer Guide To Van Fuel Allowance
In this guide, we explain everything employers need to know about van fuel allowances including reimbursement rates, benefit-in-kind tax, VAT and plenty more!
Van Fuel Reimbursement Rates
The HMRC provides suggested fuel reimbursement rates known as MAP or Mileage Allowance Payment rates, to help businesses work out how much they need to reimburse employees for business mileage or fuel costs incurred.
Whilst most employers pay the approved rate, they are not legally compelled to do so. If your business chooses to pay less than the approved MAP rate, the employee can claim the difference in their annual tax return. If, however you choose to pay a higher rate, both you and your employee will need to pay tax/NI on the additional amount.
Driver-Owned Vans
If the van is personally owned by your employee, the relevant fuel reimbursement rate is the MAP rate.
MAP rates reimburse not only for fuel but for some on-road driving costs as well. The current MAP rates are 45p per mile for the first 10,000 miles, and 25p per mile for any subsequent mileage. You can find out more about these rates at the HMRC site:
https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax
Company Vans
Unlike for company cars (i.e. a car owned or leased by a business and given to an employee for use) where the HMRC provides AFR (or Advisory Fuel Rates), there are no suggested reimbursement rates (known as AFR or Advisory Fuel Rates) for company vans.
Instead, HMRC advises businesses to implement their own agreed reimbursement rate based on cost-per-mile, per vehicle. As an alternative solution, businesses sometimes simply use the AFR rate designed for company cars and apply them to their company vans.
Van Fuel Benefit-In-Kind Tax (BIK) and VAT
Employers can offer to either pay for business-only mileage or for all mileage (i.e. both business and private use).
Combined Private and Business Use Fuel
If the employer pays (to any degree) for the employee’s private fuel and this is not paid back by the employee, a benefit in kind (BIK) tax known as Van Fuel Benefit Tax is payable by both the employee and employer (in the form of Class 1A National Insurance contributions) on the private-use element.
However (unlike with cars), for employee’s in the van scenario, just one flat-rate Van Fuel Benefit Charge (benefit-in-kind or BIK rate) applies, known as the ‘Van Fuel Benefit Charge Multiplier’. So, regardless of how much money you as an employer give to your employee for private use fuel, this figure remains the same. This multiplier figure invariably changes each year but for the 2021/2022 tax year this figure is set at £669
To calculate the amount of Van Fuel Benefit BIK payable by .your employee, you simply multiply this figure by their personal income tax rate (e.g. 20% or 40%) to find the annual amount payable.
For example: £669 (the HMRC’s van fuel benefit charge multiplier) x 20% (your hypothetical employee’s personal income tax rate) = £133.80 payable by your employee in Van Fuel Benefit Tax for this annum.
If the van is an electric van, there is no Van Fuel Benefit charge.
If an employee is given a company fuel card and does not repay the private-use element, the employee will need to pay Fuel Benefit Tax on the private-use amount.
Also important to note, is that if an employee is given a fuel allowance that covers private as well as business fuel for only part of the year, they will still have to pay Fuel Benefit Tax for the entire year.
Employers can reclaim VAT on reimbursements made to employees but only for the business mileage component. To be able to do this, you will need to retain the employee mileage record (and fuel invoices if using a fuel card).
Business-Only Fuel
(As with cars), Van Fuel Benefit Tax is only applicable where an employer pays for some or all of an employee’s private-use fuel (in addition to their business-use fuel) and the employee does not repay the employer this money (in full).
If the employer only pays for an employee’s business-fuel (not for any private fuel, except that deemed ‘permissible’, neither the business nor the employee will incur any Van Fuel Benefit Tax.
Employers can reclaim VAT on reimbursements made to employees for business mileage. To be able to do this, you will need to retain the employee mileage record (and fuel invoices if using a fuel card).
If you'd like to speak with our friendly team about business vehicle leasing, simply call 0118 920 5130 or email us at: enquiries@selectcarleasing.co.uk
We've got business car leasing covered from every angle
If you're thinking about business car leasing, we have a collection of informative guides on all aspects of business leasing to make the process as simple as possible.
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Guide
Company Cars
A company vehicle is a car or van owned or leased by a business and used either by the owner/director of the company or given to an employee for their use. Find out all about the benefits and responsibilities in our guide!
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Car Allowance
In this guide, we explain everything employers need to know about car allowances, including your employer responsibilities, the benefits and consideration points, as well as information on the financial implications for your business.
