New advisory fuel rates for company cars have been published which take effect from 1 March 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. These rates only apply to employees using a company car.

Advisory fuel rates for journeys undertaken on or after 1 March 2018 are:

Petrol Engine size
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 22p
LPG Engine size
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Diesel Engine size
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

HMRC guidance states that the 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.

You must not use these rates in any other circumstances.

Reimburse Employees for Business Travel in their Company Cars

Providing you pay a rate per mile for business travel no higher than the Advisory Fuel Rates, for the particular engine size and fuel type, HM Revenue and Customs (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 can’t 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.

Require Employees to Repay the Cost of Fuel Used for Private Travel

Supposing 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 won’t be binding where you can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

How Rates are Calculated

Rates are calculated based on fuel prices and adjusted miles per gallon figures.

Previous Rates

Previous rates are available to check from 1 June 2013.

More Info: GOV.UK AFR

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