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BiK Rates Company Car Tax

UK fleets paying up to £390m a year by offering ‘free’ fuel benefit, says TMC

So says fuel and mileage solutions specialist The Miles Consultancy (TMC), which calculates that up to 90% of drivers in receipt of private fuel Benefit-in-Kind should give up the highly taxed perk or be bought out of it.

HMRC figures show that 220,000 UK employees – nearly one in four company car drivers – are hanging on to fuel benefit. 

TMC points out that the problem with BiK fuel for the employer is that it pays for the fuel in the first place, then the driver pays high BiK tax on it and then the company pays 13.8% Class 1A NICs on the driver's tax.

“Providing BIK fuel is often the same as paying £2 or £3 a litre” says Paul Hollick, commercial director of TMC. “It rarely makes financial sense for the driver and almost never for the company.”

One TMC client with 350 company cars is saving around £440,000 per year since it strategically withdrew the benefit from drivers via a TMC-managed programme. Now it only provides private fuel if the perk it works for both sides.

Paul Hollick added: “Almost 80% of their drivers have already gone down either the opt-out or buy-out route. More than half the remainder are likely to join them. The average fully expensed fuel cost in 2014-15 was £2,700 p.a. per driver. The cost to buy them out would be £750, giving a net average annual saving of £1,950 each.” 

Assuming similar figures for all drivers currently receiving BiK fuel, withdrawal programmes could potentially save UK fleets up to £390m a year.

“The mathematics of BIK fuel don't add up. Surely it's time to weed out the BIK Fuel 'zombies'?” added Paul Hollick.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.