HMRC increases advisory fuel rates on company cars

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The rate on fuel for company cars has been increased by HM Revenue & Customs (HMRC).

The rates have been altered due to the recent increase in both diesel and petrol prices.

Curiously the LPG reimbursement rates have reduced, which appears to be an anomaly.

These rates apply when the employer reimburses employees for fuel used for business journeys in their company car.

They are also used for calculating the recoverable input VAT on the fuel element of the approved mileage payments, where employees use their own cars.

The new rates will come into force on September 1, 2021, the previous rates can be used for up to one month from the new date.

Where there has been a change the previous rate is shown in brackets:

Engine size Petrol Diesel LPG
1400cc or less

12p

(11p)
 

7p 

(8p)
1600cc or less  

10p

(9p) 
 
1401cc to 2000cc

14p

(13p)

 

8p

(9p)
1601 to 2000cc  

12p

(11p)
 
Over 2000cc

20p

(19p)

15p

(13p) 

12p

(14p) 

 

NOTE: For hybrid cars you must use the petrol or diesel rate. The advisory electricity rate for fully electric cars is four pence per mile.

“If your company is paying for all of your fuel, both for business and private journeys, then to avoid a benefit in kind charge on the private fuel provision, you should strictly re-imburse the company for the actual private fuel cost,” said Melanie Tomkins, tax manager at Ellis & Co Chartered Accountants and Business Advisers.

“By concession, these rates can generally be used to calculate the cost to re-imburse.”

Having private fuel paid for by the company on your company car may not always work in your favour.

“Remember that the P11d benefit for having private fuel provided for a company car in 2021/22 is £24,600 multiplied by the CO2 emissions percentage for that vehicle,” added Melanie.

“These days there are a broad range of CO2 emissions but for example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,102 for 2021/22.

“If they are a higher rate taxpayer that would mean £3,641 tax charge.

“That is an awful lot of private fuel that they could have bought themselves!”

For further information on this or any other tax matter please contact Melanie on 01244 343504.

Ellis & Co Chartered Accountants and Business Advisers, Chester, North Wales and The Wirral - 01244 343504, info@ellis-uk.com