Company Cars – Advisory Fuel Rates – New rates effective 1 January 2009Sunday, December 14th, 2008
Following its semi-annual review of fuel prices, HMRC has given one month’s notice of new advisory fuel rates that apply from 1 January 2009. However, HMRC has stated that the new rates may be applied immediately if employers are able and wish to do so.
HMRC documents the way in which the rates are calculated. They are based on average miles per gallon for the different engine sizes, reduced by 10% to give more realistic fuel consumption figures. The fuel prices used are
- petrol – 93.1p per litre (423.3p per gallon)
- diesel – 107.8p per litre (490.0p per gallon)
- LPG – 55.0 p per litre (249.8p per gallon).
By way of a reminder, the advisory mileage rates are provided by HMRC to help employers negotiate the terms of a dispensation with their tax office. The rates only apply where employers:
- reimburse employees for business travel in their company cars, or
- require employees to repay the cost of fuel used for private travel.
The rates are intended to reflect average fuel costs and, as a result, if an employer uses the rates for the appropriate combination of fuel and engine size, HMRC accepts that,
- where employees are reimbursed for fuel used for business travel, no liabilities for tax or NICs arise. Employers may use lower rates if the cars involved are fuel efficient or higher rates if they are less efficient. However, in the latter situation, the employer would have to demonstrate the need for higher rates. If higher rates cannot be justified, the excess is earnings for tax and NICs. Employees can obtain tax relief if they incur expenses that are not reimbursed.
- where employees repay the cost of fuel for private use, there is no fuel benefit charge or Class 1A liability. A benefit charge arises if lower rates are reimbursed, unless the employer can demonstrate that lower rates fully cover the cost of fuel for private mileage in the vehicles concerned.
Company cars – advisory fuel rates from 1 January 2009
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