SE23773a - Car fuel benefit: use of Advisory Fuel Rates in deciding the amount to be "made good"

SE23773 deals with the conditions under which car fuel benefit can be reduced to nil where the employee "makes good" the cost of all car fuel provided for private use. This page gives guidance on the use of Advisory Fuel Rates in that context.

In January 2002 Advisory Fuel Rates for petrol and diesel were published on the Inland Revenue's public website. Rates for LPG were added in May 2002. They are "guidelines on fuel only mileage rates for company cars", but also apply where employers require employees to repay the cost of fuel used for private travel.

Text of website announcement "about making good"

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

Even if it seems that the actual cost of the fuel could be more than, for example, 14p a mile for a 2.5 litre petrol car, it is only in exceptional cases that we will consider arguing that a higher repayment rate should apply. For example, where the employee drives a very large-engined company car that achieves fewer than 16 or 17 miles to the gallon. But we will always accept that the guideline rates can be used to calculate the amount that the employee must make good where the engine size is 3 litres or less.

The advisory rates will not be binding where an employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

Rates

These rates apply from January 2002 for 2002/03:

Changes will be announced on the public website (inlandrevenue.gov.uk/cars/fuel_company_cars.htm) in the first instance. For later years see the guidance a EIM21781, which will be updated as soon as possible after any announcement is made. This guidance will not be updated.

Use of Advisory Fuel Rates in dispensations

For guidance on this, see SE30057.

2003/04 onwards

The car fuel benefit has a different basis for these years. See the contents page at EIM23700.