Common expenses and benefits: tax, NICs and reporting requirements

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Company cars, vans and fuel

Company cars, vans and fuel

This guide explains your tax and National Insurance contributions (NICs) obligations if you provide an employee with a car or van, or with fuel for it. It explains the tax and NICs you’ll have to pay to us, and it tells you which forms you must use to report these benefits to us.

On this page:

What benefits must I report or pay tax/NICs on?
Work out the value to report
Where to report and what tax/NICs to pay

What benefits must I report and pay tax/NICs on?

If you make a company car or van available to an employee (or their family), you must report the value of the benefit to us. You may also have to pay Class 1A NICs on the benefit, but you do not have to pay any other tax on it. The specific rules for cars and vans differ, as explained below.

You may also have to pay Class 1A NICs if you provide fuel that an employee uses in a company car or van for private use.

Company cars – what counts as a benefit?

If you make a company car available to an employee, you will need to report it as a car benefit and pay Class 1A NICs on it. But if you prohibit private use of the car and no private use occurs in a full tax year, then there’s nothing to report and no Class 1A NICs to pay.

The category ‘private use’ includes the employee’s ordinary commuting to work. In fact the only journeys not counted as private use are those:

that form part of an employee’s employment duties (such as journeys between appointments by a service engineer)
relating to an employee’s attendance at a temporary workplace (note that a workplace isn’t temporary if an employee can expect to be there for more than 24 months, or for all or almost all of their time working for you)

Some company cars are eligible for an exemption. In these cases there’s no reporting and no NICs to pay even when there’s some private use:

‘pool’ cars – these are cars used by more than one employee, normally kept on your business premises, and used entirely for business purposes (a limited amount of private use is permitted if it is incidental to a business journey - for example, commuting home with the car to allow an early start to a business journey the next morning)
cars adapted for use by employees with a disability (including cars with an automatic transmission if the employee cannot drive a manual car), and used only for business travel and ordinary commuting
emergency vehicles used only by on-call employees of the police, fire, fire and rescue, ambulance or paramedic services

Company vans – what counts as a benefit?

A van is defined as a goods vehicle with a maximum loaded weight of 3,500 kilograms.

The basic rule for company van benefit is that there’s nothing to report and no Class 1A NICs to pay if no private use occurs.

If there is private use, you will need to report it as a benefit and you will have to pay Class 1A NICs on it, unless one of the following applies:

it’s a ‘pool’ van – the same conditions as outlined above for pool cars apply
private use is limited to ordinary commuting, or to ‘insignificant’ private use beyond ordinary commuting, and the van is available mainly for the employee’s business travel

‘Insignificant’ private use means that the employee’s private use of the van is very much an exception to normal usage, and only lasts for short periods on an occasional and irregular basis. For example:

making a slight detour to buy a newspaper on the way to work counts as insignificant private use
an employee using a van to do their weekly shopping counts as more than insignificant private use

Car and van fuel - what counts as a benefit?

If there is a benefit to report on a company car or van as explained above, you will also have to report and pay Class 1A NICs if you provide any fuel for private use in the vehicle.

However, you do not have to pay Class 1A NICs if you require your employee to make good the full cost of the fuel for private use, and they do so within the tax year.

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Work out the value to report

This section explains how to calculate the value of the car, van or fuel benefit you need to report to us. In each case, the simplest way of completing these calculations is to do them electronically rather than manually, as explained below.

Company cars – information needed to calculate the value of the benefit

You need the following pieces of information in order to work out the reportable value of a car benefit:

the list price of the car, including delivery charges and taxes – this isn’t necessarily the same as the price you paid, as you may have received a discount from the list price
the list price of any extras or accessories fitted to the car
the amount of any contributions made by the employee towards the cost of the car or its extras and accessories
the type of fuel it uses
the date on which it was first registered
the number of days during the tax year when the car was unavailable to the employee (if a car is unavailable to an employee for a minimum of 30 consecutive days, you will be able to reduce the value of the benefit you report)
any amounts you required and received from the employee as payment for their private use of the car
the car’s CO2 emissions figure – this is included on the Vehicle Registration Certificate (V5C) for cars registered since March 2001; for older vehicles use the link to the VCA car fuel data website at the end of this section
if a car doesn’t have a CO2 emissions figure or was first registered before 1 January 1998, its engine size

If you input this information to any of the following tools, the reportable value of the car benefit will be calculated automatically:

the free ‘Online Return and Forms’ service on our website, which you can use to complete and file form P11D
the interactive form P11D (with save option) on our Employer CD-Rom
the company car and fuel benefit calculator on our website and Employer CD-Rom
many commercial payroll software packages

You can also manually work out the figure to report. There’s a step-by-step guide to the process in P11D Working Sheet 2, which you can download using the link at the end of this section.

If a car you provide is shared by a number of employees, the reportable value should be divided on an appropriate basis between them. Note, however, that you cannot calculate or report shared car benefits using our calculators, online service, or interactive P11D.

Car fuel – reportable value depends on the car

You only have to report car fuel benefit and pay Class 1A NICs on it if you provide fuel that is used for private use. You have nothing to report or pay if any of the following apply:

there is no private use of the car
the employee buys any fuel used for private use
the employee reimburses you for any fuel used for private use

If there is a value to report, it is calculated as a percentage of a fixed sum – £16,900 in the tax year 2008-09. The same percentage is used for both car benefit and for car fuel benefit – it depends on the car’s CO2 emissions, or its engine size in the case of cars without an emissions figure or that were first registered before 1 January 1998.

As with car benefit, the reportable figure for car fuel benefit can be reduced to account for any days on which the car was unavailable to the employee (the same 30 consecutive day rule applies). You can also reduce the reportable value if you withdrew the provision of fuel for private use during the year and did not reinstate it. (But you can’t make a reduction for the same day twice – for example, as a day that the car was unavailable, and as a day after private-fuel provision had been withdrawn.)

In most cases, the reportable value of car fuel benefit will be calculated automatically for you if you use any of the online or electronic tools listed in the previous section. Note, however, that the calculators on our website and Employer CD-Rom won’t calculate fuel benefit if the car has been unavailable for part of the year and if private fuel provision has been withdrawn.

If you want to calculate the reportable value manually, see P11D Working Sheet 2 for a step-by-step guide to the process - use the link at the end of the section.

Company vans – a flat reportable value applies

As of April 2007, a flat reportable value of £3,000 applies to all company vans used for private use (beyond ordinary commuting and insignificant private use, for which there is nothing to report as explained in the previous section).

The £3,000 figure can be reduced if any of the following applies:

the van is unavailable for part of the year (as with cars, the van must be unavailable for a minimum of 30 consecutive days to qualify for a reduction)
you receive payments from your employee for their private use of the van
the van is shared – in which case the £3,000 is divided on an appropriate basis between the employees sharing it

Van fuel benefit – another flat reportable value

There is a flat reportable value of £500 if you provide fuel for private use in a van that is subject to the £3,000 charge under the rules outlined in the earlier section ‘Company vans – what counts as a benefit?’.

Note that this £500 figure is reduced to nil if in the year the employee makes good the cost of all fuel provided for private use (including fuel provided for commuting) – but there is no reduction at all if the employee only makes good part of the cost.

The reportable value can also be reduced on a proportional basis to account for days on which the van was unavailable to the employee. The van must be unavailable for a minimum of 30 consecutive days for a reduction to apply.

Get car CO2 emissions figures on the Vehicle Certification Agency (VCA) website

Use our company car and fuel benefit calculator

More about our online services for employers

Calculate the reportable value of car and car fuel benefit using P11D Working Sheet 2

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Where to report and what tax/NICs to pay

This section explains which forms to use to report car, van and fuel benefits to us. It also explains what tax and NICs you might have to pay to us. Your only potential liability is for Class 1A NICs – you don’t have to work out or pay us any extra tax or Class 1 NICs beyond what you already deduct through your regular payroll procedures.

If you provide a car, van or fuel benefit to an employee

At the end of the tax year, you must pay us Class 1A NICs calculated on the value of the benefit if it is provided to a company director or an employee earning at a rate of £8,500 or more per year (this earnings total should take account of the value of any benefits received by the employee).

You must also record the value of cars and car fuel in section F of form P11D, and of vans and van fuel in section G of form P11D. You are not required to pay us anything or record the value on any forms if you provide any of these benefits to an employee earning at a rate of less than £8,500 per year.

If you make a ‘pool’ car or van available to an employee

There is nothing to report and you do not have to pay us any Class 1A NICs.