Editor’s Note: The company car business mileage rates – known as the Advisory Fuel Rates – have been updated again since this story was published. Go here for the latest Company car business mileage rates.
THE SOARING price of fuel – whether petrol or diesel – has been swiftly recognised by H M Revenue & Customs (HMRC), which has updated its advisory fuel rates for company cars.
These new advisory fuel rates (AFR) replace those in force from 01 January (but available to use from December) and apply to all journeys on or after 01 March 2011.
The AFRs can be used either for paying the fuel cost incurred on business mileage in a company car, or reclaiming the private mileage element for company paid fuel, thus avoiding free fuel benefit in kind taxation.
The new AFR rates generally see the amount of money paid per mile rise by 1p per mile for petrol, diesel and LPG-fuelled company cars.
Using the new advisory fuel rates
Firms can use the advisory fuel rates to reimburse staff for the fuel used during business mileage. This applies to drivers of company-owned vehicles.
By using the advisory fuel rates, you will not have to pay tax or National Insurance contributions on them. The advisory fuel rates do not apply to business mileage undertaken in private cars – these payments are the Approved Mileage Allowance Payments (AMAPs). These have remained static at 40p per mile for the first 10,000 miles since 2002.
However the new AFR rates are ‘advisory’. You can use a higher figure without paying tax or National Insurance, but only if you can demonstrate to the taxman that the actual cost was higher.
The advisory fuel rates can also be used for company car drivers to repay the cost of fuel used for private travel if all fuel is paid for by the business – and thereby avoid any benefit in kind tax on company supplied fuel.
Provided that all of the private mileage has been properly identified, the taxman will not levy fuel benefit charge tax or demand (Class 1A) National Insurance contributions if you use the advisory fuel rates from the table below.
For hybrid cars, use the petrol figures.
These advisory fuel rates are reviewed twice a year, unless in exceptional circumstances such as this. Any changes are signalled at the beginning of December and the beginning of June.
Advisory Fuel Rates from March 2011
Engine size 1400cc or less: 14p (petrol); 13p (diesel); 10p (LPG) 1401cc to 2000cc: 16p (petrol); 13p (diesel); 12p (LPG) Over 2000cc: 23p (petrol); 16p (diesel); 17p (LPG)
These advisory fuel rates replace the rates that were available for use from the beginning of December 2010. For reference, the former advisory fuel rates were:
Engine size 1400cc or less: 13p (petrol); 12p (diesel); 9p (LPG) 1401cc to 2000cc: 15p (petrol); 12p (diesel); 10p (LPG) Over 2000cc: 21p (petrol); 15p (diesel); 15p (LPG)
Further information
- If you want to know how HMRC calculated the new rates, then go to: www.hmrc.gov.uk
- If you would like to know more about AMAPs, then go to Approved business mileage rates (AMAPs)
