Consider using fuelcards
Why use a fuelcard?
Fuelcards can improve the administration of fuel costs to the benefit of both employee and employer, whether private use is permitted or not. Companies get a clear and regular statement of fuel costs, whilst drivers don't run the risk of failing to claim reimbursement.
Fuelcards ensure that drivers can pay for fuel when needed. The employee doesn't need to worry about using his own money, and the employer may be able to avoid the need to issue cash floats to drivers. The fuelcard provider will expect prompt payment, but this will generally be after the fuel has been used.
Fuelcard reporting systems allow easy comparison of prices paid and fuel economy achieved across different areas and individuals. Tied in with mileage records, the employer can spot potential problems and drivers should also be able to identify and prove instances where they forgot to use the fuelcard.
The European Union intends that VAT should only be recoverable by the named addressee of the appropriate invoice. Fuelcard invoices conform to this rule without much difficulty. The ability of employers to recover the business element of VAT on fuel originally purchased by employees was under threat until the UK secured an exception. However if employees are to be reimbursed for fuel costs, the company must retain sufficient fuel invoices to justify the amount of VAT reclaimed. This should not be hugely onerous, but many companies will find it far easier to base their VAT returns on a few invoices from their fuelcard supplier.
Better fraud prevention if you use a fuelcard
Petrol stations have been used to collect credit card details from customers. Chip and PIN systems have also been targeted recently to copy credit and debit card details and then withdraw money from customers private accounts. This works because cards still have magnetic strips that are vulnerable to cloning. On the other hand thieves are unlikely to copy fuel card details because:
- Fuel cards cannot be used to withdraw cash from bank accounts
- Fuel cards are restricted to specific networks
- They can only be used for fuel and specified related items
Benefit-in-kind Tax implications
Fuelcards are a payment method and are not a benefit per se. Of course if the employer does not take full reimbursement for the costs of private mileage, then the employee will be taxed on fuel benefit. This is assessed on £24,600 (for 2021/22) times the appropriate CO2 percentage based on the car's emissions. See the fuel benefit check to decide if this perk is worthwhile.