However, about 15 years on since the tax increases started to bite, data from HM Revenue and Customs (2010/11) shows that 240,000 staff continue to pay tax on employer-paid-for fuel used privately.
But if those employees did the maths, industry figures suggest 97% would be better off giving up the ‘perk’ and paying for fuel used privately out of their own pocket, despite petrol and diesel prices being at record levels.
Similarly, employers should do their own calculations and see exactly how much the perk is costing them. They also need to consider that, in an era of corporate social responsibility and amid a desire to cut carbon footprints, whether they should continue to offer a benefit that encourages staff to drive.
Calculations show that fuel costs for an employee travelling 10,000 private miles a year and driving an employer-provided Ford Mondeo (129g/km CO2), with diesel costing £1.45 a litre, will be £1,237.80.
But the actual cost to the employer of providing that fuel is £1,793.86, including Class 1A national insurance and value added tax (VAT) scale charge. Meanwhile, a 20% tax-paying employee is better off retaining the perk: tax paid is £844, but retaining the benefit is costing a 40% taxpayer £450.20.
Both parties must do the maths. One idea, as with final salary pension schemes, is that of having employers withdraw the perk for all new employees and retain it only for existing staff.
Industry figures suggest that for the average fleet, 3% of company car drivers actually benefit from free fuel; for all other drivers, as well as for employers, it is the most expensive fuel they will ever buy.
Julie Jenner is chairman of ACFO (Association of Car Fleet Operators)
