Advisory Fuel Rate changes for employers with company car schemes

Fuel pump

Does your business operate with a company car scheme? Are you aware of the recent Advisory Fuel Rate changes? If not, read on as we summarise key information from the update.

What are the current Advisory Fuel Rates?

There have only been two changes to this quarter’s rates – the rate for petrol cars with an engine over 2,000cc has decreased by 1p, and the rate for LPG cars with an engine over 2,000cc has increased by 1p.

Advisory Fuel Rate table

For this purpose, hybrid cars should be treated the same as petrol or diesel cars. The rates above should not be used for vans.

When did the new rates come into force?

1 March 2017. The old rates could be used for up to one month after the new rates were enforced.

When do advisory fuel rates apply?

The government’s Advisory Fuel Rate should be referred to when reimbursing employees for business travel in a company car, or when requesting employees repay fuel consumption from private travel using a company car.

If you reimburse an employee at a lower rate than the Advisory Fuel Rate, they’re not entitled to use the Advisory Fuel Rate. In this instance, such calculations should be based on the actual costs incurred.

Are reimbursements taxable?

The HMRC will accept that there’s no taxable profit, and therefore no Class 1 NICs liability, if the rate paid per mile is equal to or less than the Advisory Fuel Rate for the engine size and fuel type of the car in question.

Can I set my own rates?

Under specific circumstances, you can choose to set your own rates so they better reflect your business’ circumstances.

For example:

  • If the cars you provide employees with are fuel efficient, you might choose to issue lower rates
  • If the cost of company travel is higher than the Advisory Fuel Rate, you might decide to offer higher rates. This might apply if, for example, employees are required to drive 4×4’s – which consume more fuel – to safely travel over rough terrain.

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