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HMRC release September 2017 advisory fuel rates

HMRC has now published the latest advisory fuel rates (AFR), effective from 1 September 2017, for users of company cars.

If you drive a company car, you can’t claim business mileage but you can recoup the cost of fuel for business journeys using HMRC’s recommended advisory fuel rates.

Compared with the rates applied in the previous quarter, there have been only 4 changes; the rates for diesel and LPG vehicles, over 2000cc, have fallen by 1 pence per mile as well as petrol and LPG vehicles between 1401cc and 2000cc which are also subject to the same reduction.

Advisory fuel rates are applicable only under the following circumstances:
– To reimburse employees for any business travel in their company car; or otherwise,
– to reclaim money from employees to cover the cost of fuel for personal travel in their company car

The new advisory fuel rates

HMRC accepts that there is no taxable profit on reimbursed travel expenses, where the rate per mile paid does not exceed the AFR. Likewise, in these circumstances, no Class 1A national insurance is payable.

Advisory fuel rates are calculated based on engine size and the type of fuel that the vehicle requires. Below are the rates effective from 1 September:

advisory fuel rates

 

 

 

advisory fuel rates

The above applies to all journeys, made on or after 1 September, until further notice. However, for one month from the date of change, employers can opt to use the previous quarter’s rates.

HMRC review the AFR four times a year and take into account recent fluctuations in the cost of fuel when doing so. It will publish rates for the next quarter shortly before 1 December 2017.

So how will it affect you?

If you… cover the cost of fuel yourself your employer can choose whether or not they wish to reimburse you. Should they opt to reimburse you, the rate that you receive must be correct. If the rate you receive is higher than the AFR, your employer must provide evidence to support the higher rate. You may face tax and national insurance liabilities if use of the higher rate cannot be justified.

If you… use a company card to pay for fuel then you will likely find yourself repaying your employer for any private trips that you take in the company car. In some cases, if you have the relevant evidence, you may repay at a lower rate, relative to the cost of your fuel.

If you… don’t pay anything towards your fuel and your employers covers the total cost you may have to pay fuel benefit tax.

Tax relief

There are a couple of instances whereby you may be eligible to claim tax relief on fuel costs, as follows:

– Your employers pays you less than the advisory rate
– Your employer does not reimburse you at all

Either way, you’ll need to fill in HMRC Form P87, or a self assessment tax return if your claim exceeds £2,500 and keep records to support your business mileage and fuel costs.

Further information about advisory fuel rates can be found here on the GOV.UK website.

 

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