Whether you operate a business with a fleet of drivers, or you’re a self-employed individual who just wants to streamline their fuel management – is a ‘fuel card’ the solution?

Let’s look into what a fuel card is, and whether it’s worth arranging one for your business.

What is a fuel card?

A fuel card is a bit like a credit card which can only be used in designated fuel stations. The card holder is able to refuel, and the cost is charged directly to the business rather than the driver – so they don’t need to use their own funds or worry about claiming the cost back from their employer or business later. For the business it means they don’t need to spend admin time reimbursing anyone and depending on what type of fuel card you have, you could also save money on the fuel itself.

Who is a fuel card for?

A fuel card can benefit anyone who uses a car for business purposes. It’s mainly businesses that operate fleets of vehicles, for instance in the logistics or courier service sector, but businesses with fewer vehicles can also benefit.

How do company fuel cards work?

As we’ve mentioned, they’re just like a credit – but in this instance they’re designed specifically for business fuel purchases. They can vary between providers but in general, drivers will go to an approved petrol station and use the fuel card each time they need to top up their petrol or diesel for work. This transaction is then processed through the fuel card provider, where all the details such as fuel amount, mileage, cost and location are recorded. The business will then pay the balance off the card at agreed intervals.

What makes this so ideal for businesses is that all fuel purchases are then put into one single HMRC-compliant invoice. It frees up a huge chunk of time chasing receipts and logging each expense individually.

What are the benefits of using a fuel card?

Fuel cards definitely have some benefits, including:

• Cost savings – depending on your fuel card provider, you can save money on fuel. For instance, at selected petrol stations some fuel card providers can save you 8p per litre of diesel. How much you can save varies depending on who you go with.
• Manage overspending – you can set limits on fuel cards to ensure drivers are only purchasing fuel, and nothing else
• Better efficiency – All fuel purchases will be recorded, and invoices are generated automatically saving you less time on accounting and admin
• Improved fleet management – you’ll be able to understand things like vehicle performance, route efficiency and fuel consumption better than you have done before.
• HMRC approved invoices – all transactions are combined into one invoice, approved by HMRC. You’ll pay VAT on your fuel expenses, so this makes reclaiming VAT much easier.

Does a fuel card come with tax implications for employees?

If you give your employees a fuel card for personal usage it will be considered a ‘benefit in kind’, so they’ll need to pay income tax on the value of the benefit (and you’ll pay employer’s NI on it too). To avoid this from happening they need to either:

• Only use fuel cards for business purposes
• Refund the company for any private travel

Can I still reclaim VAT using fuel cards in my business?

VAT can only be reclaimed for business related purposes – so any personal mileage you pay for using the fuel card (either for you or your employees) will be at the expense of the business. To avoid this, you’ll need to ensure employees use the fuel card for business purposes only – reimbursing you for any private fuel usage.

Are fuel cards ideal if you’re self-employed?

Self-employed individuals may find fuel cards useful to track things like fuel expenditure. It’s also much easier than processing lots of receipts. Basically, if you want to streamline your fuel management, it could definitely be useful for you.

Can anyone apply for a fuel card?

No. They’re only for businesses and self-employed individuals who use cars and vehicles for business purposes. If you do want to apply and you are using fuel for business purposes, you just need to contact the fuel card provider you’re interested in. Some popular ones are fuelGenie, BP, and Shell UK.

 
Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.