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Company car at fuel pump

Drivers and employers should do the maths for their own circumstances before deciding that ‘free fuel’ is a real benefit

‘FREE FUEL’ sounds like a good perk for employees but both they and their companies would almost certainly be better off if the perceived benefit was removed.

That was the message to the ACFO Conference from Matthew Walters, head of consultancy services at vehicle management company LeasePlan.

He said fuel was the biggest cost driver in managing company cars and introducing fuel cards was the ‘obvious answer’ to help manage those costs.

On many company cars the tax on free fuel is more than the company car tax

He said that SMEs that pay for employees’ private as well as business mileage frequently failed to appreciate that they were paying Class 1A National Insurance on the ‘perk’, which the Government is taxing on a benefit charge of £21,100 in 2013/14.

“Those businesses should change the way they fund fuel and they would realise the benefits immediately,” said Mr Walters.

Turning to the cost to company car drivers, he urged them to ‘do the maths’ to realise that they would in almost every case be financially better off giving up the ‘perk’ and paying for fuel used privately out of their own pocket.

On many company cars (like the Peugeot 2008 we’ve just reviewed) the tax liability on the fuel can be higher than the company car tax – a surprise to many drivers.

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