By Phil Harris
Harris & Co
THE latest Advisory Fuel Rates for company cars are now in place, with all rates, apart from the rate for diesel cars with an engine of 1,600cc or less, increasing by 1p per mile.
The rate for diesel cars with an engine of 1,600cc or less stays the same at 10p per mile, while those with an engine from 1,600 to 2,000cc and over 2,000cc increase by a penny to 12p per mile and 14p per mile, respectively.
Petrol cars with an engine of under 1,400cc will have a new rate of 12p per mile, while those with an engine from 1,400 to 2,000cc and over 2,000cc will have a rate of 15p per mile and 22p per mile, respectively.
Meanwhile, LPG vehicles with an engine size of 1,400cc or less increase to 8p per mile, and those with an engine from 1,401 to 2,000cc to 9p per mile. LPG vehicles with an engine above 2,000cc will see an increase to 14p per mile.
These 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
These rates must not be used in any other circumstances. We'll look at some related issues for each of these categories.
Reimbursing 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.
Requiring 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.
Rates are calculated based on fuel prices and adjusted miles per gallon figures.