Company cars and fuel

5 mins

Our experts at DSR Tax Refunds know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What do you need to report to HMRC?
If you are an employer and you provide a company car and fuel for your employee to use, you will need to report this to HMRC and there might be additional tax and National Insurance to pay. HMRC will expect you to report any private journeys made in the company car as well as the fuel used for those journeys.  You will also be expected to report any cars which have been adapted for use by an employee with a disability.
Are there any exemptions?
Most instances where company cars and fuel have been provided must be reported to HMRC so there aren’t many exemptions to this. If the car or fuel are provided as part of a salary sacrifice arrangement, it must be reported.
To be exempt from HMRC reporting rules, the car or fuel must be used in the following ways:

What do you need to report and pay?
If the cars you provide to your employees aren’t exempt then you need to report them to HMRC and you might have to pay National Insurance on the value of the benefit to your employee.
If you provide company cars for your employees, you initially need to report this separately to HMRC by sending them a P46 form. You can do this online through the PAYE service for employers, through your payroll software or by filling in the form online and then printing it off and sending it to HMRC.
If the car is used for private use, you will then need to include this on your annual P11D form and pay Class 1A National Insurance on the value of the car benefit to your employee.
If your employee uses fuel for private use that you pay for and doesn’t pay you back for it, this will also need to be reported on your annual P11D form and you will pay Class 1A National Insurance on the value of the fuel benefit to the employee.
HMRC state that you must keep records on all the expenses and benefits gained by your employees. You’re also expected to keep a record of the list price of the company cars you provide as you will need these when you work out their benefit value.
How do you work out the value of the company car and fuel use?
HMRC provide online tools to help you work out the value of any cars or fuel that you provide to your employees. If you prefer, you can also work out the value manually using the P11D working sheet 2 – this is the method to use if the car was unavailable for at least 30 consecutive days in the tax year AND you were providing fuel for private use but have stopped doing this now.
HMRC provide advisory fuel rates to help you work out mileage costs in some situations, for example if you are reimbursing an employee for fuel they have bought and used during a business journey.
You will also have to pay employers’ National Insurance on certain road costs if they are considered to be employee benefits. These could include parking permits, congestion charges or road toll fees. You wouldn’t be expected to pay this on such running costs as car services or insurance.
There are special rules for cars which have been adapted for employees with a disability if they are used for private use. In this instance, HMRC doesn’t take private use to include commuting to and from work or any travel for work-related training so these kinds of car use wouldn’t need to be reported or paid on. HMRC also has special rules relating to automatic transmission in cars adapted for disable drivers as well as for any adaptions to the interior that are required to make the car usable for the person with the disability.
If the company car and fuel form part of a salary sacrifice agreement and the cost of the car and fuel is less than the amount of salary given up by the employee, you need to report the salary amount to HMRC instead of the car and fuel value. This only applies to arrangements made after 6th April 2017.
How can DSR Tax Refunds help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Refunds are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
This page was last updated on 06/11/2018.

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