FINANCE BILL 2002: EXPLANATORY NOTE
CLAUSE 34: CAR FUEL:CALCULATION OF CASH EQUIVALENT OF BENEFIT
SUMMARY
1. The clause introduces a new way to calculate the taxable benefit or ?cash equivalent? of free fuel provided for private journeys of an employee using a provided company car. The new calculation links the taxable benefit of the fuel to the CO2 emissions of the car by using the percentage figure already used to calculate company car tax under section 157 ICTA and allows proportionate reductions in the charge where the availability of free fuel is withdrawn from an employee part way through the year.
DETAILS OF THE CLAUSE
2. Subsection (1) states that section 158 is to be amended in the ways that follow.
3. Subsection (2) replaces the current tables of values and rules in subsections 2, 2A and 2B of section 158 with a new subsection (2) . This new subsection (2) introduces the new method for working out the cash equivalent of free fuel for private use. This is to multiply the figure of £14,400 by the appropriate percentage figure, that percentage being the same figure that is used - in accordance with Schedule 6 ICTA 1988 - to calculate the cash equivalent of the benefit of the company car for which the fuel is provided. .
4. Subsection (3) replaces the current power for the Treasury to alter the tables that set down the amounts of the fuel scale charges with a new power to alter the figure in new subsection (2) by Order in advance of any future tax year.
5. Subsection (4) ensures that the value of the cash equivalent is reduced in proportion to the number of days in which the company car is not available, within the meaning in Schedule 6.
6. Subsection (5) introduces new subsections (6A) and (6B).
7. (6A) provides that there will be a proportionate reduction in the value of the cash equivalent where, from part way through the tax year, free fuel for private use ceases to be made available the following methods ?
- fuel is no longer provided by the employer
- the employee has to pay back to the employer the whole cost of the fuel for private use
- fuel is only provided for business use, not private use.
8. (6B) sets out that if the provision of free fuel is recommenced at any time later in the tax year the proportionate reduction ceases to have effect, and a full year's value is re-introduced.
9. Subsection (6) introduces a new subsection (8) that lays down the method for working out the amount of a proportionate reduction in the value of the cash equivalent where this is appropriate.
10. Subsection (7) introduces a new subsection (9) that provides that there is no taxable fuel benefit in respect of the provision of electrical power for an electrically propelled vehicle. .
11. Subsection (8) says that this new provision will come into effect for 2003/04 and subsequent years.