Company Cars – Change in Advisory Fuel Rates

Tax Comments Off on Company Cars – Change in Advisory Fuel Rates

The advisory fuel rates (guidelines on fuel only mileage rates for company cars) were introduced in 2002 with the aim of saving time for both employers and the Revenue by setting out some figures that can be used in the calculation of mileage payments for business travel in company cars.

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 do not apply in any other circumstances.

In particular, employees driving company cars are not entitled to use them to claim a deduction if employers reimburse them at lower rates. Such claims should continue to be based on actual costs incurred.

Increased Advisory Fuel Rates for Company Cars from 1 September 2012:

These rates apply to all journeys on or after 1 September 2012 until further notice.

Engine Size Petrol Previously* LPG Previously* Diesel Previously*
(1/6/12-31/8/12) (1/6/12-31/8/12) (1/6/12-31/8/12)
1400cc or less 15p (15p) 10p (11p) 12p (1600cc or less) (12p)
1401cc to 2000cc 18p (18p) 12p (13p) 15p (1601cc-2000cc) (15p)
Over 2000cc 26p (26p) 17p (19p) 18p (18p)

*If you require further details for earlier periods please do give me a call.

Furthermore, you can claim 5p per mile for each passenger making the same business trip!

Employers reimbursing employees for the cost of fuel used for business travel:

If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type for the car, the Revenue will accept that there is no taxable profit and no Class 1 NICs liability.

The advisory rates represent average fuel costs, and employers may wish to set rates which better reflect their particular circumstances. For example, where the cars in the fleet are fuel efficient, employers may prefer to reimburse at lower rates than those outlined below.

If an employer pays mileage rates that are higher than the advisory rates but is unable to demonstrate that the fuel cost per mile is indeed higher, there is no fuel benefit charge if the mileage payments are made solely for miles of business travel. Instead, any excess will be treated as a taxable profit and as earnings for Class 1 NICs purposes. The employee can obtain relief for any actual expenses which have not been reimbursed.

Employers who require employees to repay the cost of fuel used for private travel:

Providing that all private miles of travel have been properly identified, the Revenue will accept that there is no fuel benefit charge, and therefore no Class 1A NICs liability, where the employer uses the appropriate rate from the above table (or any higher rate) to work out the cost of fuel used for private travel that the employee must repay to the employer.

If you have any queries please call me.

Sue Stephens, Personal Tax Consultant