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The warning, which comes from Big Four firms Deloitte & Touche and Ernst & Young as well as fuel management company Arval PHH, follows advice from firms and fuel experts, calling on companies to re-examine their fuel positions and in some cases stop offering the free fuel perk.
Free fuel is heavily taxed resulting in higher national insurance contributions and, in some cases, higher benefit in kind tax bills for employees.
However, many firms are also advising their clients to return their fuel cards, making the false assumption that using a specialist fuel purchasing card and getting free fuel are the same thing.
Taking this action could cost UK businesses hundreds of thousands of pounds, the tax experts warned.
Alison Chapman, tax partner at Deloittes, said: ‘It is our view that the vast majority of companies and drivers would be better of by dropping free fuel, although each should take care to check its individual tax position. However, free fuel and fuel cards are two entirely different things and the one should not be linked with the other.’
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