Welcome to the latest ‘stop press’ edition of our newsletter.

As always, if there is any aspect you would like clarifying or to discuss, please do give a member of the team a call.

Since the Inland Revenue announced the advisory fuel rates for company car drivers back in January 2002, there has always been the question, ‘When are the rates going to be updated?’.

With the price of fuel being somewhat variable since 2002, although generally on the increase, a number of employers have been requesting increases in the rates they pay to company car drivers for business mileage. These requests were met with some resistance from the Inspectors granting Dispensations.

From 1 July 2006, HMRC has announced new rates for the reimbursement of business miles for company car drivers.

Engine Size	Petrol	Diesel	LPG
<1400cc	11p	10p	7p
1400-2000cc	13p	10p	8p
>2000cc	18p	14p	11p

Where an employer reimburses genuine and allowable business mileage at the above rates from 1 July 2006, HMRC agrees that no taxable profit arises and no liability to Class 1 or Class 1A occurs.

The rates are advisory, and it should not be taken as read that all employers should pay these rates – it is simply an agreement that payments up to these rates do not crystallise a tax or NIC liability.

In addition, these rates are not binding where an employer can demonstrate that the actual fuel cost per mile exceeds those above, e.g. for employees driving 4x4s, sports cars, towing large loads. Separate negotiations can take place to arrive at a more realistic reimbursement rate where required.

If an employer decides to reimburse genuine and allowable business travel above these rates, and cannot demonstrate that the costs simply cover the actual cost of fuel, this will not result in the fuel scale charge being levied. Instead, the excess above the rates will form taxable profits on the employee and earnings for Class 1 NIC purposes.

The rates mentioned above can also be used for employees who are required to reimburse the cost of private mileage. As always, these claims should be closely scrutinised to ensure that no element of private motoring is being reimbursed. In addition, employers should try to avoid using both the payment and reimbursement routes for different groups of employees, as this is likely to be scrutinised by HMR&C during any PAYE review.

If these rates are used for reimbursement of private fuel (rather than the payment of business fuel), the rates are effective for vehicles with engine sizes of 3 litres or lower.

These rates are to take effect from 1 July 2006, and will be reviewed by HMRC again if the fuel prices vary by 10%. The current prices used in the calculations are 96.4ppl for unleaded, 98.8ppl for diesel and 46.9ppl for LPG.

The advisory note from HMRC also confirms that ‘Customs’ will also accept these figures for VAT purposes. If you would like to discuss any VAT implications, please call The VAT Consultancy on 01962 735350.

Finally, it has come to our attention that “due to a computer glitch” not everyone has received previous newsletters. Please accept our apologies if this is the case, we have only just noted the error.

---

This page was last updated on Friday, January 04, 2008.