NIM06054 - - Class 1 NICs: Expenses and Allowances: Petrol: Purchasing fuel on behalf of the employer - The Overdrive Case

NIM06053 explained that in some cases, the liability for NICs on fuel will depend upon the action taken by the employee prior to the purchase of the fuel and the arrangements that an employer has put in place to allow an employee to purchase the fuel on his behalf.

The case of R v The Department of Social Security ex parte Overdrive Credit Cards Limited1991 WLR 1991 - `Overdrive바카라 사이트™ - focused attention on the ability of company directors and certain authorised employees to enter into contracts to purchase goods or services on behalf of their companies, see NIM02191.

Although Overdrive centred primarily on fuel purchased by way of an employer바카라 사이트™s creditcard/fuel agency card, the case established that for NICs purposes, there should be no difference in the treatment of fuel obtained by whatever payment method.

Moreover, Overdrive established that - excluding any fuel identified as being solely for business use 바카라 사이트“ Class 1 NICs liability arose in respect of fuel purchased by any payment method.

The reason for this is that, at the point of transferring the fuel from the pump into the tank of a car, the employee is effectively entering into a contract with the garage to purchase the fuel and to pay for it.

The employee may then substitute his employer바카라 사이트™s liability for that of his own by offering a company credit card, or charging the purchase to his employer바카라 사이트™s account, or by using a fuel agency card. Despite such an action, when the employer then discharges this liability he is in fact making a payment of 바카라 사이트˜money바카라 사이트™s worth바카라 사이트™ to the employee and a liability for Class 1 NICs arises on what is a payment of earnings.

Whilst Overdrive established the general rule that liability for Class 1 NICs arises, no challenge was made to the argument that liability did not arise if it was explained in advance, and accepted by the provider/seller, that the purchase was being made on behalfof the employer. Under such an arrangement the employee is placing himself in the position of an agent for his company and the establishment of this `agency바카라 사이트™ status is sufficient to render the employer liable to pay for the petrol. Following Overdrive, this process became known as 바카라 사이트˜using the litany바카라 사이트™.

Where an employer gives an employee prior authority to purchase fuel on his behalf and

  • the employee explains this in advance of the contract to purchase the fuel being made and
  • the supplier accepts this
  • no Class 1 NICs are due.
  • In allowing the employee to purchase fuel on his behalf, what the employer is actually providing to the employee is the benefit of free fuel which is disregarded from earnings on which Class 1 NICs are due, see NIM13170. The fuel is then liable for Class 1A NICs, see NIM16170.
  • The substitution of the employee바카라 사이트™s liability for that of the employer바카라 사이트™s by use of the litany operates irrespective of the manner in which the employee pays for the fuel, with the exception of non-cash vouchers.