Advisory fuel rates for company cars - New rates apply from 1 January 2008

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6 December 2007

HMRC's advisory fuel rates are used by employers to negotiate dispensations for mileage payments for business travel in company cars. The rates only apply where employers:

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

The rates are intended to reflect average fuel costs and, as a result, if an employer uses the rates for the appropriate combination of fuel and engine size, HMRC accepts that,

• where employees are reimbursed for fuel used for business travel, no liabilities for tax or NICs arise. Employers may use lower rates if the cars involved are fuel efficient or higher rates if they are less efficient. However, in the latter situation, the employer would have to demonstrate the need for higher rates. If higher rates cannot be justified, the excess is earnings for tax and NICs. Employees can obtain tax relief if they incur expenses that are not reimbursed.
  
  
• where employees repay the cost of fuel for private use, there is no fuel benefit charge or Class 1A liability. A benefit charge arises if lower rates are reimbursed, unless the employer can demonstrate that lower rates fully cover the cost of fuel for private mileage in the vehicles concerned. In the case of cars which are more expensive to run, HMRC will not argue that a benefit charge arises if the advisory rates are, in fact, less than the actual fuel costs, unless they are used for cars with engine sizes of more than 3 litres.

The rates are based on the fuel cost per mile for the most popular fleet cars. They were introduced from January 2002 and were last adjusted in August 2007.

As a result of the recent general increases in car fuel prices, HMRC has reviewed the advisory fuel rates again and the changes from 1 January 2008 are shown in the following table:

• petrol - 102.1p per litre (464.3p per gallon)
• diesel - 106.3p per litre (483.0p per gallon)
• LPG - 50.2 p per litre (228.2p per gallon).

...UK Payroll News - Latest

Further information:
Company Cars - Advisory Fuel Rates for Company Cars
Company Cars - Advisory Fuel Rates for Company Cars from 1 January 2008
Company Cars - Advisory Fuel Rates for Company Cars - earlier rates

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