If you have access to a company car, as an employee or director, you will be taxed on the use of the car as a benefit in kind.
The amount of the benefit depends on the CO2 rating of the vehicle.
For the last tax year, 2018-19, the amount of the benefit ranges from 13% to 37% of the list price when new of the vehicle you used. Even electric cars create a taxable benefit, albeit at the lowest 13% rate.
Diesel cars carry an additional 4% surcharge if the vehicles do not meet the Real Driving Emissions 2 (RDE2) standard.
Much of this is well known to company car drivers and the annual reduction in their tax allowances has become an expected price you pay for the use of a company car.
But what if you not only get the use of a company car but your employer also pays for your private use fuel?
If this is the case you will be suffering a second benefit in kind deduction, the car fuel benefit charge. As with the car benefit, the amount you pay is based on the same percentage rate (linked to CO2 emissions) and this percentage rate is applied to an arbitrary figure (£23,400 for 2018-19).
Accordingly, if you pay a car benefit based on a 30% rate and your employer pays for all your fuel, then you will also be taxed on a car fuel benefit of £7,020. For a higher rate taxpayer this will cost £2,808 in additional tax.
This begs the question, how much private fuel did I actually use and if I repaid this to my employer would I avoid the car fuel benefit charge? And more importantly, would the cost of the fuel repayment be lower than the tax charge?
If the numbers crunch in your favour, yes, you would, as long as you make the repayment for 2018-19 before 6 July 2019.
No doubt practitioners reading this post will be supporting clients to take advantage of this possible reduction in liability, and if you are not a tax practitioner, visit your professional advisor and make the necessary calculations.