TT69: Company Car Fuel Update

September 22, 2005

In Topical Tips 53 we dealt with the important saving available if an employee chooses to pay for all fuel in their company vehicle and then claim back money for only the actual business mileage driven (to cover just the fuel cost).

In the example quoted we showed that an employee will break-even, even if they paid for all their private fuel because they then saved the swingeing benefit in kind income tax levied on “free” fuel provided by the company.

However, the example showed the company was substantially better off and could thus afford to compensate the employee for the change, whilst still making substantial savings.
New rates
With effect from 1st July 2005 the new rates allowed by H M Revenue & Customs (HMRC) for reclaiming fuel used in company cars have been revised upwards as shown in the table below.

Engine size Petrol Diesel LPG
1,400cc or less 10p 9p 7p
1,401cc to 2,000cc 12p 9p 8p
Over 2,000cc 16p 13p 10p

Barnes Roffe Topical Tips

  • Review each staff member’s petrol arrangements immediately to see how much you could save (see Topical Tips 53 for details of the calculation).
  • Remember that under the new rules you can change the employee’s arrangement to cease paying for all fuel during the fiscal year and do not have to wait until 5th April to do so.
  • You must keep detailed records of mileage claimed (date, amount, car engine size and reason for the journey) to satisfy any future HMRC visit.
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