Advisory fuel rates for company cars

 

Advisory fuel rates for company cars

New advisory fuel rates for company cars have been published which take effect from 1 September 2019. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2019 are:

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 8p
1401cc – 2000cc 10p
Over 2000cc 14p
Engine size Diesel
1600cc or less 10p
1601cc – 2000cc 11p
Over 2000cc 14p

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars or
  • require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

 

When you can use the mileage rates

The rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

Reimburse employees for business travel in their company cars

If you pay a rate per mile for business travel no higher than the Advisory Fuel Rates, for the particular engine size and fuel type, HMRC will accept there’s no taxable profit and no Class 1A National Insurance to pay.

You can use your own rates which better reflect your circumstances if, for example, your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates.

If you pay rates that are higher than the advisory rates and cannot demonstrate the fuel cost per mile is higher, there’s no fuel benefit charge if the mileage payments are solely for miles of business travel. Instead, you’ll have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.

Require employees to repay the cost of fuel used for private travel

If you’ve correctly recorded all miles of private travel and used the correct rate (or anything higher) to work out the cost of fuel used for private travel that the employee must repay to you, HMRC will accept there’s no fuel benefit charge.

The advisory rates will not be binding where you can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

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