Changes to advisory fuel rates – December 2017

We look at the changes to advisory fuel rates...


As of December 2017 the new Advisory Fuel Rates came into effect after an announcement by HM Revenue and Customs.

So what are these changes? And do these changes take into account everyone’s wishes?

In this article, we look at the changes to the advisory fuel rates and how they will affect you.

What are advisory fuel rates?

Firstly, let’s have a quick look at what advisory fuel rates are.

Advisory fuel rates, or AFRs, are used by employers to calculate fuel costs for tax purposes. It may apply to company cars when an employee is required to repay the cost of fuel if it is used for private travel or if the company reimburses the employee for business mileage.

Here are the times you can use these mileage rates;

When reimbursing employees for business travel in their company cars

AFRs can be used if you pay a rate per mile for business travel. If you follow the AFRs for the particular engine size and fuel type then HMRC will accept that there is no taxable profit.

You can, however, use your own rates if they better reflect your circumstances. For example, if your company vehicles are more fuel efficient or the cost of business travel is higher than the guideline rates.

When you require employees to repay the cost of fuel used for private travel

If you have recorded all the private travel miles correctly and used the correct rate to work out how much your employee must repay you for private travel then HMRC will accept that there is no fuel benefit charge.

For more information on this we suggest you head to the gov.uk page and read more on advisory fuel rates.

petrol pumps of different colours with a person in a green suit holding one of the pumps

How are advisory fuel rates calculated?

Fuel rates are calculated based on fuel prices and are adjusted miles per gallon figures.

What are the current advisory fuel rates?

These fuel rates were implemented on the 1st of December and will continue until March 2018. However, for one month from the date of change (so up until 1st January), employers may choose to use either the previous or new rates.

There have been four changes to the rates that were issued in September, with diesel and LPG-powered (liquid petroleum gas) vehicles over 2,000cc receive a 1ppm boost. Petrol and LPG-powered vehicles between 1,401cc and 2,000cc also see the same increase.

Hybrid cars are treated as either petrol or diesel cars. You can have a look at the rates in the tables below.

Diesel Advisory Fuel Rates
Petrol Advisory Fuel Rates
LP Advisory fuel rates

These rates are reviewed four times a year and it has been this way since March 2011. HMRC will no longer consider changing the rates outside of these times unless fuel prices fluctuate by more than 5% from the current published rates. They also do not apply to vans.

They do apply for VAT purposes but if you are an employer, then you can only reclaim VAT if the employee supplies a receipt.

Do the advisory fuel rates include plug-in hybrid cars?

Electric and plug-in hybrid vehicles have hit record levels this year, with over 35,000 plug-in cars being sold in the UK this year. 24,276 of these sales were plug-in hybrid vehicles.

This rise in popularity has led to a call for HMRC to include advisory fuel rates for plug-in cars to increase take-up and adoption of plug-in hybrids by companies for their fleets. However, these rates do not include figures for plug-in cars and instead are treated as petrol or diesel cars as per normal hybrid cars.

The BVRLA have recently called for them to be included in the advisory fuel rates, saying that it is a ‘hindrance to take-up’. There was even a summit earlier this year by ACFO, a fleet representative body, to provide HMRC with data that could have led to the publication of advisory fuel rates for plug-in cars.

blue car parked being charged up by an electric charging point

However, they have yet to be included in the advisory fuel rates, so the fight continues.

Do you know how and when Electric Cars were invented? If you don't we highly recommend you have a look

Do I have to pay company car tax if I use my company car for personal mileage?

Yes, you do, if you use your company car for personal mileage then you will have to pay company car tax.

This includes travelling to and from work, as in the eyes of HMRC, this counts as a personal journey. So if you use your company car to travel to and from work, to take your kids to school or to go shopping on the weekend, then you will have to pay company car tax on your car.

Are there any exemptions?

The only way to be exempt from this is for you to not use your company car for personal use. This would mean that you leave your vehicle on work premises overnight and at weekends and use it strictly for business purposes.

Another option is to have your company car as a ‘pool car’. This means that the vehicle is kept at the workplace overnight and on weekends and when it is used, it is shared by other employees to carry out business related journeys. This includes things such as transporting employees to meet clients or going to training days.

A rarer exception is if your company vehicle is adapted for mobility reasons, in which case you won’t have to pay company car tax and you can use it for personal mileage.

In conclusion, advisory fuel rates, or AFRs are rates that apply when employers reimburse employees for business travel in their company cars or they require their employees to repay the cost of fuel used for private travel. These rates are published four times a year, and will only change outside of these times if fuel prices change by 5%. The rates are based on engine size and fuel type, either petrol, diesel or LPG. Hybrids are considered either petrol or diesel and plug-in hybrid are the same despite campaigns by the likes of the BVRLA and fleet organisations for HMRC to include separate rates for these plug-in hybrids. If you use your company car for personal use then you will have to pay company car tax. We advise business users on everything from advisory fuel rates to company car tax, to which cars make the best company cars. So if you have any questions we would be delighted to hear from you.

Andrew Kirkley
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