Income Tax (Earnings and Pensions) Act 2003 section 160A

Benefit of van fuel treated as earnings: optional remuneration arrangements

Section 160A deals with how van fuel provided through a salary sacrifice or optional remuneration arrangement is taxed, ensuring the employee is charged on the higher of the fuel benefit's cash equivalent or the amount of salary or benefits given up.

• Where van fuel is provided under an optional remuneration arrangement, the taxable amount is the greater of the cash equivalent of the fuel benefit or the amount of salary/benefits foregone
• If the amount foregone exceeds the cash equivalent, the amount foregone is treated as taxable earnings instead of the normal van fuel benefit charge
• If the fuel benefit would normally qualify for a tax exemption but that exemption is blocked by the optional remuneration arrangement rules, the cash equivalent is treated as zero for comparison purposes — meaning the amount foregone will always be the taxable figure
• Where earnings need to be apportioned between the van fuel benefit and other benefits under the arrangement, this must be done on a just and reasonable basis