NIM05663 - Class 1 NICs: expenses and allowances: fuel: liability for nics on fuel
General liability for NICs
NIM05662 lists the different methods by which an employer may provide fuel to his employees.
Liability for NICs on fuel will depend upon
- the action taken by the employee prior to the purchase of the fuel and
- the arrangements that an employer has put in place to allow an employee to purchase the fuel on his behalf
- the method of provision of the fuel.
The general rule about NICs liability is that if an employer pays for fuel used by his employees and
- the fuel is used for private mileage or
- the payment the employee receives exceeds the actual cost of the business expense incurred
a NICs liability will arise.
Payments made before 6 April 2002 - Liability for Class 1 NICs
Prior to the above date, where the cost of the fuel was met by the employer
- reimbursing the employee’s fuel bills
- paying a cash allowance
- paying a round sum allowance
- paying a mileage rate
- providing a non-cash voucher for fuel
- supplying a fuel agency card or credit card to allow the employee to purchase fuel where the employee is not acting on the employer’s behalf when purchasing fuel (see NIM06054)
- allowing an employee to charge the fuel to an employer’s garage account where the employee is not acting on the employer’s behalf when purchasing fuel (see NIM06054)
the full cost of all private fuel and any amount which exceeded the actual business expenses of using the car for business travel, must have been added to any other earnings paid in the same earnings period when they were calculating Class 1 NICs liability.
For guidance on:
- identifying business expenses, see NIM05020
- acceptable mileage rates, see NIM05700
- a non-cash voucher for fuel which can be disregarded for Class 1 NICs purposes, see NIM02416.
Payments made as of 6 April 2002 - Liability for Class 1 NICs
When calculating Class 1 NICs liability you will need to consider the effect of the statutory scheme for dealing with NICs liability on motoring expenses paid to employees using their own vehicles for business travel. See NIM05800 for guidance about the scheme.
Liability for Class 1A NICs
Where the employer provides fuel by means of a payment or benefit in kind, for example
- direct from his own fuel pump
- employee uses an employer’s fuel agency card, credit card or debit card to purchase fuel on the employer’s behalf, see NIM06054,
- employee acts on his employer’s behalf when he charges fuel to his employer’s garage account
Class 1A NICs will be due on the full cost of the fuel unless all of the fuel is used for business purposes. For further guidance on Class 1A NICs on fuel: