Employers that provide a company car and pay for the employees’ private fuel create tax, NIC and administrative issues for both parties.
- Employers will be liable for Class 1A National Insurance charges on the taxable benefit created by the provision of the car and payment of private fuel; unless the employee fully reimburses the private fuel costs, and
- Employees will suffer a benefit in kind charge for the use of the car and the private fuel provided. The car fuel charge can be reduced, or eliminated, if the private fuel costs are reimbursed.
But what happens if the fuel provided by the employer for private use is electricity?
Electricity does not count as fuel for this purpose. So, for example, where an employer enables an employee to recharge his car at work, or at home, and the employer pays the bill, there is no taxable benefit even if the car is available for private use.