When is a benefit not a benefit?

The provision of private fuel for company car drivers probably represents the most inefficient benefit in kind an employer can provide to an employee. Unless an employee is travelling in excess of circa 24,000 private miles each year, potentially high levels of savings are available to the business without impacting on the financial benefit currently enjoyed by each employee.

When is private fuel not a benefit?

Consider a higher rate employee currently travelling 10,000 private miles per year in company vehicle with emissions resulting in a 21% benefit in kind tax charge. Under this scenario it is likely that the employee would have already opted out of the private fuel benefit in kind as the tax costs outweigh the benefits of having the fuel provided:

• The cost to the business of providing the employee with fuel would be in the region of £1,200 per annum (November 2010);
• The cost to the business in additional Class 1A National Insurance would be in the region of £480 per annum (2010/2011); and
• The cost to the employee of the benefit in kind tax would be in the region of £1,512 per annum (2010/2011).

But what about the employer?

This is the side of the equation missed by most businesses. Considering the scenario above, if our employee were travelling say 13,000 private miles per annum, then their fuel costs are likely to be in the region of £1,560 per annum which would result in them opting for private fuel as they will be £48 per annum better off.

From a business perspective however, to provide the employee with this benefit of £48 per annum costs some £2,040.

Alternative Solutions

Cobia has assisted a number of businesses with alternative methods of private fuel reimbursement with average savings of £1,000 plus per car per year. Our service includes full communication and policy design support as well as fully administered calculations.

Should you wish to find out more please e-mail info@cobia-uk.com or speak with your usual Cobia contact.