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What Are the Advisory Fuel Rates for Company Cars?

14th August 2019

 

Advisory Fuel Rates (AFRs) are the rates recommended by HMRC to assist businesses either in reimbursing employees for using company cars for business travel or in being reimbursed back by employees for fuel costs for private travel when using a company car.

The rates that apply from 1 June 2019 are:

(please note that you can use the previous rates for up to 1 month from the date the new rates apply).

Engine sizePetrol - amount per mileLPG - amount per mile
1400cc or less12 pence8 pence
1401cc to 2000cc15 pence9 pence
Over 2000cc22 pence14 pence
Engine sizeDiesel - amount per mile
1600cc or less10 pence
1601cc to 2000cc12 pence
Over 2000cc14 pence

* Hybrid cars are treated as either petrol or diesel cars for this purpose.

 

Reimbursing Employees for Fuel Cost

When a company reimburses an employee for fuel costs for a business trip using the AFRs above, there will be no taxable benefit and no Class 1A National Insurance due.

Companies are permitted to pay a lower rate than the above if they can demonstrate that the company cars are proven to be more fuel efficient than the AFR suggests.

They also have the right to pay a higher amount than the AFRS but in this case the company would need to demonstrate that the fuel cost per mile is actually higher; if not, any excess payment will be treated as taxable profit and subject to Class 1A National Insurance contributions.

Employees Reimbursing the Company for Fuel Cost

When an employee is required to repay the company for fuel cost for private trips using a company car, HMRC will accept that there is no fuel benefit charge when the price paid is equal or higher than the AFR above.

If the employee pays a lower amount, then it will be necessary to show that the amount paid covers the amount of personal fuel expense in full to avoid any charge.

 

If you require tax advice on the above, please don’t hesitate to contact a member of our team who will be happy to help you.