Free personal fuel for drivers? They might not thank you for it

Many businesses are so busy trying to fill their shopping bag with the best discounts and lease deals that they can miss the huge holes in the bottom of it.

By Marc Mcloughlin, managing director, KeyFleet Fuel, maintenance costs, accidents, repairs and vehicle down times are often afterthoughts of a procurement process, but a quick fix for many businesses to redress the balance could be the way your drivers pay for their private fuel.

If your business pays for your employees’ private fuel, as a perk, then it is possible that both you and your driver are out of pocket – it all depends on how much personal driving they do. Benefit in kind (BIK) tax for personal mileage works as follows.

There is a notional figure of £22,200 x CO2 based benefit % charge x your rate of tax.

If we use an example of a diesel 119-CO2 vehicle (21 per cent) and a 40 per cent taxpayer the actual cost to the driver for the benefit of having their private fuel paid for by the business would be a huge £1,864pa.

Now based on the advisory fuel rates, say 12ppm for fuel reimbursement, this same driver would need to drive a huge 15,500 personal miles a year to get any financial benefit from this intended perk.

Let’s assume for this example that the driver does a reasonable 8,000 personal miles a year. This means that not only is your driver out of pocket to the tune of nearly £1,000 a year but the business is needlessly shelling out several hundred pounds a year for this intended perk. The cleanest way to solve this problem is to allow your drivers to continue to have their private fuel funded by the company but make a salary deduction each month based on the AFR rates for the actual amount of private miles they have driven.