Unmanned pumps make the NIC litany hard to use

Company directors and authorised employees can enter into contracts to buy goods and services on behalf of their companies, and the agency principle behind that applies generally, not only to fuel. In R v Department of Social Security ex parte Overdrive Credit Cards Limited [1991], the courts established for National Insurance purposes that there is no difference between fuel obtained by an employer's credit card, a fuel agency card, a garage account or a fuel-only voucherGOV: Class 1 NICs are due on all of it, except fuel identified as used solely for business purposesGOV. The reason is that at the moment fuel passes from the pump into the tank, the employee personally contracts with the garage to buy it and pay for itGOV; when the employer later discharges that bill, the employer is paying money's worth to the employee, which counts as earningsGOV.

Liability can still be avoided through agency, the arrangement known as using the litany. Three conditions must all be met: the employer authorises the employee in advance to buy on its behalf, the employee explains before the contract is made that the purchase is as the employer's agent, and the seller accepts that agencyGOV. Where those hold, no Class 1 NICs are dueGOV — the employer is providing free fuel, which is disregarded for Class 1 purposes and falls to Class 1A instead. The substitution works however the employee pays, with the single exception of non-cash vouchersGOV.

At self-service fuelling stations and electric charging points that escape route is hard to useGOV, because nobody is present at the point of purchase to hear that the fuel or charge is being bought as the employer's agent. In that situation who contracts with the garage turns on the information passed to the payment machine during the transactionGOV. Where the machine receives the employer's details, the argument that the employee acted as the employer's agent is strongerGOV; where it receives the employee's details, the employee carries personal liability for the payment and the default Class 1 treatment followsGOV.

Class 1 NICs follow the payment of earnings, so agency status decides whose payment the fuel bill isGOV. In practice, that means checking which details — the employer's or the employee's — the payment credentials pass to the machine at unmanned pointsGOV.