TT107: Tax-Free Business Mileage Rates Update

December 22, 2007

Company car mileage rates go up this time!

In Topical Tips 100 we advised on the new rates an employee can claim for business mileage when they pay for all the fuel on a company car. That was for August, but now the rates have changed again!

With effect from 1 January 2008 H M Revenue & Customs (HMRC) has increased the amounts that can be claimed tax-free.

Revised rates

Engine Size Petrol Diesel LPG
1,400cc or less 11p 11p 7p
1,401 to 2,000cc 13p 11p 8p
Over 2,000cc 19p 14p 11p

VAT reclaim

And remember, in order for you to claim back the VAT element your staff should follow the guidance in Topical Tips 77.

And back to the future

Concerns have been raised with HMRC regarding the consequent administrative difficulties if the tax-free rates are subject to frequent changes as a result of petrol price fluctuations. HMRC has confirmed that the rates will only be reviewed in the event of a variation of fuel prices of greater than 10%.

Barnes Roffe Topical Tips:

  • If you have a specific vehicle that substantially differs from the above, then it is possible to ask your local PAYE office for their agreement to using a different rate for that vehicle.
  • You must keep detailed records of amounts claimed (date, mileage, engine size, rates used, reason for the journey) to satisfy any HMRC visit.
  • This treatment is extended to employers with dispensations for fuel rates that are linked to the advisory fuel rates. Where a dispensation is in place this will need to be reviewed/adjusted.
  • This does not alter the 40p/25p rate payable when staff use their own cars for company business.

Consult your Barnes Roffe LLP contact Partner for guidance in this important area.

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