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Was not sure whether to put this in the tax section or here as really I believe this instance to be a breach of contract. Basically, this is the predicament:

 

Our employer provides some of it's employees company cars due to the nature of their work, of which employees receive a company car (for which they are taxed accordingly) and also a company fuel card, for which covers their personal mileage.

 

The company deducts a nominal amount from each of the employees wages every month to cover the costs.

 

The company also actively promotes this benefit as a reason to work for them, and this is so in my case as well. In the real world, the legality of this however, is questionable as personal mileage, including communting to and from your place of work should be declared as a benefit in kind. This BIK has just become a major spanner in the works as this not only leaves the company open to legal action, but also the employee.

 

Need I suggest the complication for employees who have benefited from this scheme for some years as this would make them liable to additional tax from HMRC as well as adjustments and overpayments to Tax credits etc.

 

Now, in order to resolve this issue (bearing in mind that this is through no fault whatsoever of the employees), the company issued a memo stating that with almost immediate effect, the fuel cards will be recalled and a new scheme will be put in place that will only cover business miles.

 

This, in many employees eyes is seen as a major kick in the teeth. There are many employees who travel some distance to their work and have turned down other offers of employment due to this "free fuel" benefit.

 

I would like to know where we stand with this, basically, here is the legal side. In the contract of employment, it

clearly states...

 

"A car is provided for your use on business for the employer. A fuel card is issued to enable you to meet petrol costs. A monthly deduction from your pay of£x will be made to cover personal mileage (subject to increase)."

 

The simple fact that the contract states that a fuel card is available and only an increase in the allowance will be considered is not the part there is the issue with.

 

The Memo that was sent out states that the Fuel cards would be revoked - this i believe to be a change in the terms of the contract that should have been consulted with the employees, but it was basically forced upon everyone.

 

There are employees who will be out of pocket to the tune of £200+ per month in fuel costs and this will have to be met from their own pocket, although business mileage will be covered.

 

Bear in mind this came through a mistake by the company and not the employees and no cash alternative has been offered nor is it likely to be offered unless some sort of collective or formal action is taken.

 

Basicall what I want to know is:

 

- Can this be contrued as Breach of Contract by the Employer and should this route be pursued - albeit the implications of termination of current contract etc?

 

- Are the Employees now liable to inform the HMRC of this "mistake" so as to ensure the repayment of tax received that should have been declared i.e. PAYE TAx, tax credits etc and who should be liable for this?

 

- As the scheme was "promoted" as a perk to the employees, should the company offer to reimburse the employees who are now out of pocket?

 

Sorry for the long post, but any help would be appreciated as I feel that there are more implications and rights with regards to the employees as have been let on by our employer.

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Hello and welcome to CAG.

 

I've flagged this for a site team member who understands Inland Revenue matters for the BIK and tax side of your problem and I would expect the guys here will be able to tell you about the contractual side of it. They should be around later this evening or tomorrow.

 

My best, HB

Illegitimi non carborundum

 

 

 

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- Can this be contrued as Breach of Contract by the Employer and should this route be pursued - albeit the implications of termination of current contract etc?

 

Hi Grumpy,

 

Now I'll leave the tax issues to other CAGGERS but as regards your potential claims as regards this proposed unilateral contractual variation, and as to whether this is a breach of contract, I wanted to add a few thoughts.

 

You ask, is this a breach of contract. Well on the facts as you present them, this could be the case. This is because, an employer should not 'all of a sudden ask employees to sign a new contract of employment and accept new terms and conditions'

 

An employment contract, is just like any other contract. It should, generally speaking, not be changed unilaterally. Thus if one side, the employer, changes a fundamental term of the contract (e.g. one that affects pay or BIK), then this should only be done by mutual agreement with the other contracting party – the employee

 

Good practice is that the employee should have been consulted re the proposed changes.

 

Was there any consultation here?

 

Even if not, lack of consultation alone is not a free-standing head of claim. Consultation could vary with size of workforce, and the length of service of each employee affected, and of course the reason for the change.

 

If a change is imposed,the employee has 4 options, to continue to work and say nothing, continue to work, but make it clear this was under protest, continue to work and yet claim that you have been dismissed from your old contract or resign and claim constructive dismissal.

 

The difference here is that to be successful in most of the above in any meaningful way you will need to show that this is not just a breach of contract but a FUNDAMENTAL or repudiatory breach of contract.

 

Furthermore, you say the term in the contract states, “A car is provided for your use on business for the employer. A fuel card is issued to enable you to meet petrol costs. A monthly deduction from your pay of£x will be made to cover personal mileage.”

 

Has the employer been deducting sums for 'personal mileage' in reality? When they said above, “...to meet petrol costs...”, did that refer to just petrol costs relating to business mileage or all your petrol costs in one month?

 

Che

...................................................................... [FONT=Comic Sans MS]Please post on a thread before sending a PM. My opinion's are not expressed as agent or representative of The Consumer Action Group. Always seek professional advice from a qualified legal adviser before acting. If I have helped you please feel free to click on the black star.[/FONT] [FONT=Comic Sans MS] I am sorry that work means I don't get into the Employment Forum as often as I would like these days, but nonetheless I'll try to pop in when I can.[/FONT] [FONT=Arial Black][FONT=Comic Sans MS][COLOR=Red]'Venceremos' :wink:[/COLOR][/FONT][/FONT]

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can you get hold of your prior year PD11 and describe how the car and fuel were treated on that?

Never assume anyone on the internet is who they say they are. Only rely on advice from insured professionals you have paid for!

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Hi che,

 

thanks for responding, there was absolutely no consultation - with anyone, they put it out via email once everyone had left for the holiday on the Friday. Was handled pretty poorly.

 

There is also no material change to the contract yet, but I am presuming they must now issue a new contract within one month stating the removal of the fuel card and that there will be no deduction for personal fuel. There is also no clause for variation in the contract.

 

The employer deducts the £x amount to cover personal mileage. The fuel card is provided to cover both business and personal mileage and the £x amount is a way of saying that the company will charge you this £x amount in lieu of your private mileage. This £x amount is the same for all employees, hence why some people have benefited from the change and others have lost out - although I think more have lost out.

 

The deduction is shown in our payslips as a deduction for personal fuel and this in reality is deducted from our monthly payslip.

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Emmzii,

 

on the P11D, the only deduction is for the cash equivalent of the car, there is no other info in respect of fuel. The deductions actually show a "0" under the cash equivalent where I would suspect the fuel deduction would go.

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The employer deducts the £x amount to cover personal mileage. The fuel card is provided to cover both business and personal mileage and the £x amount is a way of saying that the company will charge you this £x amount in lieu of your private mileage. This £x amount is the same for all employees, hence why some people have benefited from the change and others have lost out - although I think more have lost out.

 

Ahh, ok I get it. What a weird clause. I'm surprised that some employee's didn't take courier jobs at the weekend as it appears that whatever their personal mileage and petrol spend each month the amount deducted (£x) always remained the same.

 

Bizarre.

 

As regards the change, and their need to tell you within on month they can just notify you in writing of this as the section 1 statement that entitles you to a written 'contract' need not all be in one document. Of course this doesn't mean the change is permissible.

 

I think you may be fighting an uphill battle here, as the express contractual term to which you refer is not really being changed that much? I mean (£x) must have come from somewhere and presumably at that time did represent an actual amount that you would have used in petrol in one month.

 

Any Union, and how many affected by the change?

 

Che

Edited by elche

...................................................................... [FONT=Comic Sans MS]Please post on a thread before sending a PM. My opinion's are not expressed as agent or representative of The Consumer Action Group. Always seek professional advice from a qualified legal adviser before acting. If I have helped you please feel free to click on the black star.[/FONT] [FONT=Comic Sans MS] I am sorry that work means I don't get into the Employment Forum as often as I would like these days, but nonetheless I'll try to pop in when I can.[/FONT] [FONT=Arial Black][FONT=Comic Sans MS][COLOR=Red]'Venceremos' :wink:[/COLOR][/FONT][/FONT]

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No union unfortunately. I think they sought legal advice and as you say are prob quite right to change it. There is no doubt they have used it without any care for how the employees would react.

 

As you say, it was open to abuse, however a consultation process would have been nice as they have essentially removed a benefit.

 

Im sure the more logical people would have seen the companies predicament, but i think they have just thought "@&&k the staff, lets see how much we can get away with!".

 

That really just leaves the tax liability!

 

Thanks for your help che, but if anything else springs to mind, would be interested to see your comments.

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I think you are all due a tax bill as you *have* been receiving a benefit in kind. You as individuals, not the company.

 

Going to be fun calculating it with no records of business mileage tho - what a mess!

Never assume anyone on the internet is who they say they are. Only rely on advice from insured professionals you have paid for!

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This is complex and is clearly not of your doing, however I would personally seek expert legal advice.

 

IMO. While Emmzzi is correct in that you owe HMRC tax on the benefit in kind (i.e. the personal fuel element) it is clear that your employer has been charging you a fee for this which is almost certainly against HMRC rules and unless they have declared and agreed this, it could be viewed as tax avoidance. Hence you may have a claim against your employer for the monies they have taken from you and possibly damages since it is likely you will be fined by HMRC and the monies backdated to the time at which it started. However HMRC may view this as your responsibility given that there is a decalration for such within the self assessment section of the tax declaration form that I assume you submit each year? This is why you need to consult an expert.

 

I would also ask your employer what arrangement they had in place with HMRC given the published rules on fuel tax payment for personal and business use is published on the HMRC website?

 

I would imagine that the problem will now involve splitting the historical business fuel use from the personal fuel use, since they may claim all of your mileage is personal unless you can show otherwise. Did you record all the business mileage that you undertook, this may be useful since it is likely that they will require the total mileage on each car to to accounted for (i.e. business versus personal).

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As a person who has a co car but no fuel card but I have had one in the past I would say accept the change and keep qute. If you have a fuel card and the co deduct personal milgae at a fixed sum then 9 times out of 10 you are onto a winner and in reality pay very little for personal milage. Should questions be asked then the employees may well have to pay some extra tax, so I wiould say it was nice while it lasted but things change.

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Thanks for all the comments. It is good to get different points of view. I think I will bite the bullet on this one in the form of Breach of Contract, however, the potential "tax avoidance" does concern me.

 

I shall be seeking legal advice as to protect my interests with regards to the tax issue which was in no way my fault. In fact I would have never known had someone not told me this was the case. Goldfish, I do not submit a Self Assessment as I am an employee within a company, therefore I turn up, they pay my wages and deal with all the tax legislation!

 

No record is kept of business v's personal mileage - there was apparently no need. This is a complete shambles, one I am unfortunately part of.

 

I will update you's on the outcome.

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OK, here is the tax position;

 

A company car is made available for private use, a benefit in kind (BIK) arises ( calculated as manufacturers list price x % based on CO2 emissions, this figure is reduced by any period of unavailability and any payments towards private use) the BIK is declared on P11D and included in the employees tax code.

With regards to company fuel, the benefit is calculated by using a fixed sum (£18800 for 2011/12 onwards) multiplied by the % for CO2 emissions. This is the fuel scale charge which is also a BIK as company fuel has been made available for private use.

Irrespective as to wether there is one drop or 20 gallons, the fuel scale charge remains the same and is only reduced where;

the employee is required to make good to the employer providing the fuel for private motoring (including travel between home and work) the WHOLE of the expense incurred in its provision and in fact does so or

fuel is made available only for business travel.

In the case of a fuel card, this should bear the name of the company and or the vehicle reg.

When filling up, you present the fuel card to the garage attendant including the current mileage.

Details of the business journey should be maintained i.e name of client/company, location of client/company, start and end mileage, details of fuel purchased (e.g fuel type, no of litres used, cost per litre)

The employer can then reimburse the business mileage only by utilising the advisory fuel rates (see my explanation below regarding this which I recently presented to an employer- sorry for the length of it but I think it explains the position in detail)

 

The employees should advise HMRC of any changes to their income even if they are not sent a tax return. Clearly this is an employer error and they should be liable (legally) for any monies due.

Employee reimbursed by the employer

If the rate paid per mile of business travel is no higher than the advisory rate, we will accept that there is no taxable profit and no Class 1 National Insurance contributions (NIC) liability, and that these rates may be included in a dispensation.

Employers do not have to use these rates and can set rates, which better reflect their particular circumstances. For example, where the cars are fuel efficient, employers can reimburse at lower rates.

*If an employer can demonstrate that the cost of business travel in company cars is higher than the guideline mileage rates they do not have to reimburse at the advisory rates. For example, where employees need to use particular types of car such as four wheel drive cars to cover rough terrain.

If an employer pays mileage rates that are higher than the advisory rates but cannot demonstrate that the fuel cost per mile is higher, there is no fuel benefit charge if the mileage payments are made solely for miles of business travel. Instead, any excess will be treated as a taxable profit and as earnings for Class 1 NIC purposes. Rates above the advisory fuel rates should not normally be included in a dispensation.

Employee repays the employer

Providing that all of the miles of private travel have been properly identified, we will accept that there is no fuel benefit charge if the employer uses the appropriate rate, or any higher rate, to work out the cost of fuel used for private travel that the employee must repay to the employer.

The advisory rates do not have to be used if an employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

*These Advisory Fuel Rates (AFRs) are designed to reimburse company car drivers for business mileage undertaken for their company.

Taking an Audi A6 TDIe as an example on a business journey

The Audi has a combined economy figure of 53.3mpg, but an actual running average of 43mpg. The Advisory Fuel Rate for a 2.0 diesel is 11p per mile. Here are the maths, starting with the actual running average.

o Audi A6 TDIe

o 200 miles @ 43mpg

o 11p per mile AFR = £22

o 4.7 gallons @ 544.2p per gallon (AA April average for diesel) = £25

o Driver subsidising journey by £3

However, if you take the official figure, the maths swing in favour of the driver.

o Audi A6 TDIe

o 200 miles @ 53.3mpg

o 11p per mile AFR = £22

o 3.75 gallons @ 544.2p per gallon (AA April average for diesel) = £20

o Driver benefits by £2

So the balance is very delicate. And while even the most considered eco-driving will help - traffic conditions really dictate what that average might be.

The AFR rates are 'advisory'. You can use a higher figure without paying tax or National Insurance, but only if you can demonstrate to HMRC that the actual cost was higher. Clearly, this is an option, but you will need to take specialist advice first and ensure HMRC agrees with you before implementing any rise.

Businesses and company car drivers should consider ways of mitigating the cost, perhaps by taking alternative travel, or by rescheduling meetings to take advantage of off-peak traffic flows to ensure the most economical journey.

Gbarbm

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  • 4 months later...

Sorry to hijack this thread but I am in the same boat. My employer is removing the fuel card which has been part of my contract of employment for the last 10 years and is also written into it. In its place, we will get a pence per mile allowance based on your company standing. (we have a grading system)

 

We all have to declare mileage, business, commuting and personal so no issues there in terms of the tax man.

 

We had group email last week saying it was going to be removed early next year. No mention of receiving new contracts or any right to appeal or even what to do if we disagreed. To me, they have done this the back door route. By sending out email and document explaining the new changes, we are unwittingly accepting the changes. People are not happy at all but don't know what their rights are.

 

Employee helpline said the fuel card was not actually contractual even though it is written in as being provided for the job. I'm confused. Does this mean that my contract has been worthless for the last 10 years and everything else within it is also not contractual?

 

Can they do this? Any thoughts please?

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