Income Tax (Earnings and Pensions) Act 2003 section 152

Car fuel: proportionate reduction of cash equivalent

Section 152 deals with reducing the taxable car fuel benefit proportionately when certain conditions mean the employee did not have access to free private fuel for the whole tax year.

• The fuel benefit charge is reduced proportionately for any days when the car itself is unavailable (for example, because it has been returned to the employer).
• A proportionate reduction also applies for any days when the fuel facility is not available, when fuel is provided only for business travel, or when the employee is required to reimburse—and does reimburse by 6 July after the tax year—the full cost of fuel provided for private use.
• If any of these reducing conditions is met for part of the year but later in the same year none of them applies, the earlier period of reduction is disregarded entirely—this prevents employees from gaining a tax advantage by temporarily giving up and then resuming free private fuel.
• Where a reduction does apply, the reduced cash equivalent is calculated as CE × (Y − D) ÷ Y, where CE is the full cash equivalent, Y is the number of days in the tax year, and D is the total number of days on which either the car was unavailable or one or more of the reducing conditions was met.