Advisory fuel rates explained as well as when they are used and the HMRC fuel rates in use from 1 December 2020.
The guide has been updated on 1 December 2020 for changes in the latest legislation.
When Are The Advisory Fuel Rates Used?
The HMRC Advisory Fuels Rates are the amounts set out by HMRC that you need to use when:
- Reimbursing employees for private fuel used for business travel in a company car
- Setting the rate that employees repay businesses for private fuel use on fuel cards
- Calculating VAT on mileage claims
You’ll need to use these HMRC Advisory Fuel Rates regardless of the true cost of the fuel for any of the above.
Advisory Fuel Rates
The applicable rates from 1 December 2020 are:
|Engine size||Petrol - amount per mile||LPG - amount per mile|
|1400cc or less||10 pence||7 pence|
|1401cc to 2000cc||11 pence||8 pence|
|Over 2000cc||17 pence||12 pence|
|Engine size||Diesel - amount per mile|
|1600cc or less||8 pence|
|1601cc to 2000cc||10 pence|
|Over 2000cc||12 pence|
The advisory electricity rate for fully electric cars is 4 pence per mile. Hybrid cars are treated as either petrol or diesel cars for this purpose.
Mileage Allowance Payments vs. Advisory Fuel Rates
Mileage allowance payments are used when a business reimburses an employee when they use their personal vehicle for business travel, and are set at more than the price of fuel per litre to reflect the wear and tear on the car and incidental costs such as:
Advisory rates relate to just fuel. That’s why they are used when employees have a company car because the company will be picking up the running costs of the car.
Claiming Back VAT on Fuel
VAT registered businesses are entitled to reclaim VAT on expenses, including fuel. Fuel is vat-able at the standard VAT rate of 20% so it is possible to reclaim VAT using the advisory fuel rates.
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