Advisory Fuel Rates for Company Cars

If you are provided with a car by your employer then you will be taxed on the benefit that arises. If fuel is provided for private purposes then an additional benefit arises. It is difficult to envisage a fuel benefit not arising if the company pays for any fuel. However, one way to avoid the benefit is for the company to reimburse the employee for fuel used on company business by means of a mileage rate.

It is open to the company to calculate the actual cost of fuel per mile driven. However, to avoid this the tax office have issued a set of advisory rates. Whilst these have been available for some time rates have been published to take effect from 1 June 2013.

These rates apply to all journeys on or after 1 June 2013 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

The advisory fuel rates for journeys undertaken on or after 1 June 2013 are as follows, with the previous rates shown in brackets:

Petrol and LPG

Diesel

Please note that not all of the rates have been amended.

There are a number of other points to be aware of about the advisory fuel rates:

• Employers do not need a dispensation to use these rates, and they do not need to be reported on a P11d
• Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred less any reimbursements received.
• The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation or be reported on a P11d.

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