NIM16387 - Class 1A National Insurance contributions: Special Class 1A NICs cases: Vans: Fuel for use in a provided van: From 6 April 2005 to 5 April 2007

The income tax position

Before 6 April 2005, where a van was provided to an employee chargeable to income tax under section 154 of ITEPA 2003, no income tax was due on fuel provided for that van. With effect from 6 April 2005 new rules were introduced to charge to income tax, the benefit of fuel provided in respect of a van chargeable to income by section 154, see EIM22700. However, no tax could arise because the cash equivalent of the benefit of the fuel is nil for both the 2005 to 2006 and 2006 to 2007 tax years. This applies whether or not the fuel is used for private mileage.

The NICs position

Although Class 1 NICs liability can arise on any fuel purchased by the employee for use in a provided van if:

• the fuel is used for private travel, or
• the fuel is used for business travel but the amount paid or reimbursed by the employer exceeds the actual cost of the business travel

and the fuel provided is not provided by way of a payment in kind, for example, fuel from an employer’s pump HMRC administratively ignores any Class 1 NICs liability.

If fuel is provided by means of a benefit, for example, from an employer’s own fuel pump, no Class 1 NICs liability arises because payments in kind are disregarded from earnings. There is no Class 1A NICs liability because there is no tax liability on the fuel.

Where an employee uses the litany in advance of purchasing fuel for use in an employer provided van, no Class 1 or Class 1A NICs will be due. For guidance about the litany see NIM02191.