AMENDED TAX FREE FUEL RATES

If your employer provides you with a company car you may claim mileage allowance solely for the cost of fuel used on business journeys, or alternatively, repay your employer for fuel used on private travel (including that between your home and normal workplace) based on HM Revenue & Customs (HMRC) approved rates.

HMRC regularly publish approved 'fuel only' rates, which mean that you will have certainty that you are claiming no more than the true cost of fuel used on business journeys and so will not be taxed on a 'fuel benefit'.

However, HMRC's accepted mileage rates do change from time to time in accordance with fluctuating fuel costs and, with little publicity, can easily be overlooked. As an example of these fluctuations, since 5th April 2009, the rates have changed with effect from 1st July (downwards) and 1st December 2009 (upwards).

There could be a sting in the tail if you have been either claiming more for business mileage, or repaying less for private mileage, than HMRC's official rates. In HMRC's view, fuel for private travel is provided by the employer and, therefore, the car driver is taxed on the fuel benefit scale charge - unless the car user meets the cost of all fuel used privately.

In the past, when rates have changed, HMRC have said they would not pursue this line, however, no such reassurance has been given for some time. It, therefore, seems that HMRC will be looking to charge company car drivers on the full fuel scale benefit who might have paid a few pence less for their private travel (as opposed to the official rate). This could add up to £2,500 to your annual tax bill. Employers would also be hit with extra Employer National Insurance on the fuel benefit.

The rates shown have increased with effect from 1st June 2010 (previous rates shown in brackets).

Take Action Now to Avoid an Additional Tax Charge
If you repay your employer for fuel used on private travel you will need to increase your payments immediately (unless using diesel cars under 2000cc). Equally, those claiming business mileage from their employers can now claim additional amounts where appropriate.

Please Note: these changes do not affect employees or directors who use their own cars for business travel, nor company car drivers whose employers pay for all their fuel.

Who to Contact
If you are in any doubt as to whether these changes apply to your circumstances, or wish to discuss the implications further, please do not hesitate to contact Aileen Scott, Tax Partner, on 0141 887 4141.