Private fuel benefit

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Where an employee receives a company car and also receives free or subsidised fuel for private use, a further taxable benefit arises. Due to further tax rises in April 2008, the provision of private fuel is now very inefficient for employers to provide and should be withdrawn - for information on how to do this visit Intelligent Fleet here.

HOW TO CALCULATE THE TAX ON PRIVATE FUEL BENEFIT

Private fuel benefit is calculated in a similar manner to company car tax. A scale charge set by the Government (currently £16,900) is multiplied by the same percentage for CO2 emissions as used to calculated the company car taxable benefit. The tax payable is therefore:

£16,900   x   CO₂ emissions percentage   x   employee tax rate

Example for 2008/09

Ford Mondeo 2.0 TDCi Zetec, CO2 emissions 161 g/km, 40% taxpayer

£16,900  x   23% (per CO2 table)   x   40%   =   £1,554.80 annual tax payable

Opting out of private fuel benefit

As demonstrated in the above example, the tax on private fuel benefit is quite punitive, especially if the employee does not travel many private miles. If the employee in the above example would not spend £1,554.80 on private fuel in a year then they would be better off by giving up the benefit.

Where private fuel is given up part way through a tax year, the taxable benefit is time-apportioned provided the benefit is not reinstated later in that tax year.

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