Employee Fuel Allowance

[lizzy chaplin]

I have 1 employee who doesn't earn enough to pay tax but I do require them to travel for work to visit suppliers occasionally.

Are they eligible to claim mileage and can anyone support with the process for this? Would I add onto their payslip or simply reimburse?

 

[StevensOnln1]

Ask them to keep a record of the date, place and mileage for each business journey, then total it up each week or month and pay them at whatever rate you've agreed (45p/mile up to 10,000 miles and 25p/mile over that is the maximum HMRC allow for a car or van). Not sure it matters if it goes on their payslip as a non-taxable expense or whether you make a separate payment.

 

[Ozzy]

It doesn't go on the payslip, just reimburse but have a record for each payment.

We had a tax inspection just before the pandemic and the HMRC inspector wrote up their recommendations around business journeys, so quoting from my memory of that. It was the only thing, I'm pleased to say, that they had an issue with.

We were not paying the maximum rate for mileage allowance and they recommended that we should increase it to the maximum allowance, so we do up it to the maximum allowed.
Although we had a mileage claim form it didn't contain enough information for HMRC to be happy. We had to amend the form to ensure each journey included the origin and destination full address including postcode for each journey, and a few words of what the purpose of the journey was.

 

[lizzy chaplin]

Ask them to keep a record of the date, place and mileage for each business journey, then total it up each week or month and pay them at whatever rate you've agreed (45p/mile up to 10,000 miles and 25p/mile over that is the maximum HMRC allow for a car or van). Not sure it matters if it goes on their payslip as a non-taxable expense or whether you make a separate payment.

Thank you! Do they need to share with me petrol reciepts and is this something I need to keep hold of?

 

[Ozzy]

Do they need to share with me petrol reciepts and is this something I need to keep hold of?

No don't pay for their petrol otherwise they will be taxed on it as BIK, just pay mileage.

 

[lizzy chaplin]

It doesn't go on the payslip, just reimburse but have a record for each payment.

We had a tax inspection just before the pandemic and the HMRC inspector wrote up their recommendations around business journeys, so quoting from my memory of that. It was the only thing, I'm pleased to say, that they had an issue with.

We were not paying the maximum rate for mileage allowance and they recommended that we should increase it to the maximum allowance, so we do up it to the maximum allowed.
Although we had a mileage claim form it didn't contain enough information for HMRC to be happy. We had to amend the form to ensure each journey included the origin and destination full address including postcode for each journey, and a few words of what the purpose of the journey was.

Perfect, thank you! I'll make sure to have a mileage claim form with all the info. Also, do you know if this would count as a business expense?

 

[lizzy chaplin]

No don't pay for their petrol otherwise they will be taxed on it as BIK, just pay mileage.

Will the payment count towards their income? Would they need to delcare to HMRC?

 

[StevensOnln1]

It's a business expense for you and not taxable for the employee if you pay them within HMRC's approved mileage rates.

 

[Chris Ashdown]

Dont forget to ensure they have insurance for business use

 

[Rawlinson Pryde]

You may actually want the employee to keep the petrol receipts so you can claim back VAT (assuming you are registered) on the fuel element, which is the gross amount (and not the 45p rate). You may not think it is worth the hassle. Probably best to get your accountant to check you are doing your first set of calculations correctly if you go down this route.

Advisory fuel rates

Find out about advisory fuel rates for company car users, when you can use them, and how they're calculated.

www.gov.uk

18-280 Input tax and mileage allowances (advisory fuel rates) | Croner-i Tax and Accounting

(SI 2005/3290) (In-Depth: ¶19-312)

library.croneri.co.uk

 

[Rawlinson Pryde]

An extra link for clarification

VIT55400 - Motoring expenses: road fuel and the private use of cars - HMRC internal manual - GOV.UK

www.gov.uk

Input tax when fuel is purchased by employees​

If employees are reimbursed for road fuel they have bought for business purposes the VAT charged can be treated as input tax. This can only be done if the business can show that the employee has been reimbursed either:

• for their actual expenditure; or
• by way of a mileage allowance.

The business must also obtain and retain invoices for all fuel purchased by its employees. This means either full VAT invoices or less detailed invoices. Input tax can only be claimed on the cost of fuel for business use in making taxable supplies so any invoices need only cover this amount.

HMRC accepts that the amount of the invoice in many cases will not match the input tax claim in respect of business fuel in any one claim period, particularly where fuel is purchased towards the end of the period.

Clearly a claim cannot be supported by a VAT invoice that is dated after the dates covered by the claim. This means, in practice, that it may be advisable for employers to arrange for their employees who use, or may use, their cars for business purposes to retain all fuel invoices. This will ensure that, at the end of the claim period the value of business fuel is covered by an invoice.

 

[Bob Morgan]

The 45p Per Mile (25p Per Mile >10,000 Miles) is NOT an Absolute Maximum! It is a 'Threshold' where anything >45p Per Mile becomes taxable. There is also a further increment of 5p Per Passenger Per Mile.

Expenses and benefits: business travel mileage for employees' own vehicles

Tax and reporting rules for employers covering the cost of employees using their own vehicles for business travel

www.gov.uk

 

[lizzy chaplin]

Dont forget to ensure they have insurance for business use

Do they need to have insurance for business use if they are using the car to meet suppliers?

 

[lizzy chaplin]

You may actually want the employee to keep the petrol receipts so you can claim back VAT (assuming you are registered) on the fuel element, which is the gross amount (and not the 45p rate). You may not think it is worth the hassle. Probably best to get your accountant to check you are doing your first set of calculations correctly if you go down this route.

Advisory fuel rates

Find out about advisory fuel rates for company car users, when you can use them, and how they're calculated.

www.gov.uk

18-280 Input tax and mileage allowances (advisory fuel rates) | Croner-i Tax and Accounting

(SI 2005/3290) (In-Depth: ¶19-312)

library.croneri.co.uk

We are not VAT registered so that makes things a little easier - thanks!

 

[StevensOnln1]

Do they need to have insurance for business use if they are using the car to meet suppliers?

They need business use cover for any business journeys.

 

[Mark T Jones]

They need business use cover for any business journeys.

But many will enable you to specify 'to and from arranged appointments', which is far cheaper than carrying goods or commercial travelling

 

[WaveJumper]

Do they need to have insurance for business use if they are using the car to meet suppliers?

In a word yes, just think back to when you arrange your insurance policy and the questions you are asked ie the car is used for social domestic and pleasure only (basic), or then maybe used to commute on a daily basis (price goes up as added risk) then you get into is the car being used for business. Certainly back in the day when I was employed I had to submit copies of my car insurance cover to the company to ensure I had the correct cover.

So if any doubts I would suggest speak to the insurance company

 

[Bob Morgan]

Yet another thread that defines all of the reasons NOT to do something! One of the biggest differences being that in the UK it is the DRIVER that is Insured - In other parts of the world it is the VEHICLE! - STEP OUTSIDE OF THE UK BUBBLE!

 

[Newchodge]

Do they need to have insurance for business use if they are using the car to meet suppliers?

They aren't meeting suppliers as part of their normal daily life, are they? They meet suppliers as part pf their job, therefore it is a business use. To put it another way, you would only pay mileage for business journeys, so they need business insurance.

 

[IanSuth]

The 45p Per Mile (25p Per Mile >10,000 Miles) is NOT an Absolute Maximum! It is a 'Threshold' where anything >45p Per Mile becomes taxable. There is also a further increment of 5p Per Passenger Per Mile.

Expenses and benefits: business travel mileage for employees' own vehicles

Tax and reporting rules for employers covering the cost of employees using their own vehicles for business travel

www.gov.uk

And it is only I think 26p/mile for a motorbike

 

[IanSuth]

They need business use cover for any business journeys.

The basic version is called Class 1 business use, it cost me nothing to add to my bike insurance or for my wife to add to our car insurance on which I am a named driver.

You have to be very very careful with insurance exemptions, I had a mate lose his licence (for the min the judge could do) because Aviva changed the wording of social domestic and pleasure to not include commuting to and from a place of work but didnt make that clear ina renewal and he was caught out on a routine stop "what is the purpose of your journey today sir"

Also note that whilst usually education is covered if an apprentice has days in college that is not education it is commuting as part of their employment and so they may not be covered

 

[Bob Morgan]

. . . he was caught out on a routine stop "what is the purpose of your journey today sir"

Also note that whilst usually education is covered if an apprentice has days in college that is not education it is commuting as part of their employment and so they may not be covered

He should have kept his mouth shut! - You do NOT have to say anything!