News

Fuel prices have gone up again, partly due to the rising price of oil, and partly due to the reintroduction of the fuel escalator which increased the duty on all road fuels from 1 April 2009. New advisory fuel rates have been announced to take effect from 1 July 2009, but employers can use the new rates immediately if they wish to do so.

The rate for petrol vehicles for engine sizes of 2000cc or more has increased from 17p per mile to 18p, but rates for smaller petrol engines have remained the same. All rates for diesel engines have decreased by 1m per mile. Rates for LPG vehicles are held the same except for the middle band of engine size from 1400cc to 2000cc, which has decreased by 1p per mile. So you may be better off using the old advisory fuel rates until 1 July 2009.

Its is worth noting that advisory fuel rates are not statutory rates, employers can use different rates providing that they can show that the cost of fuel used in their company vehicles is higher, either because the average cost of fuel purchased locally is higher, or the vehicle for which the rate is being claimed is less fuel efficient.

The new advisory fuel rates are based on the following average per litre costs, with the previous average costs shown in brackets:

• Petrol: 97.5p (93.1p)
• Diesel: 103.4 (107.8p)
• LPG: 52p (55p)

If you want to use a per mile rate which is higher than the advisory fuel rate to reimburse employees for the cost of fuel, you should keep records to show how they calculated the average fuel cost per mile for their company cars.

Where employees use their own cars for business journeys the tax free authorised mileage rate is still capped at 40p for the first 10,000 miles per tax year and 25p for additional miles. However, many employers don't even pay those rates to employees who have to drive on business. Where there is a shortfall the employee can reclaim the difference on their self-assessment tax return, or if they don't complete an SA return and the claim is less than £2,500 they can use form P87 (Tax relief for expenses of employment)

Advisory fuel rates from 1 July 2009