Company Car Tax Guide

Advisory Fuel Rates for Company Cars from 1 February 2007

These rates apply to all journeys on or after 1 February 2007 until further notice:

Engine Size Petrol Diesel LPG
1400cc or less 9p 9p 6p
1401cc to 2000cc 11p 9p 7p
Over 2000cc 16p 12p 10p

Petrol hybrid cars are treated as petrol cars for this purpose.

Where employers have practical difficulties implementing the new lower rates they can continue to use the older higher rates for a further month, i.e. to 28 February 2007, without having to take account of the income tax, NIC and VAT implications of paying allowances at the higher rate. This will allow time for drivers and employers to adjust to the new rate.

This treatment will extend to those employers with dispensations for fuel rates which are linked, usually by a formula, to AFRs.

Employers can however use the new lower rate with effect from 1 February for employees with fuel cards who reimburse their employers for private fuel bought with a company fuel card.

These rates are calculated from the fuel prices in the table below:

Fuel Engine Size
(cc)
Mean
MPG
Applied
MPG
Fuel price
(per litre)
Fuel price
(per gallon)
Pence
per mile
AFR
 
Petrol up to 1400 46.7 42.0 86.3 392.2 9.3 9
Petrol 1400 – 2000 38.5 34.7 86.3 392.2 11.3 11
Petrol over 2000 27.9 25.1 86.3 392.2 15.6 16
 
Diesel up to 2000 50.3 45.3 90.5 411.2 9.1 9
Diesel Over 2000 37.5 33.7 90.5 411.2 12.2 12
 
LPG up to 1400 37.4 33.6 45.5 206.9 6.2 6
LPG 1400 – 2000 30.8 27.7 45.5 206.9 7.5 7
LPG over 2000 22.3 20.1 45.5 206.9 10.3 10

Notes:

  1. Mean mpg – miles per gallon – from manufacturers information, weighted by annual sales to businesses (Society of Motor Manufacturers and Traders (SMMT), 2005).
  2. Applied mpg – adjusted downwards by 10% to take account of real driving conditions and lower fuel economy for older cars
  3. For LPG, mpg is assumed to be 20% lower than for petrol due to lower volumetric energy density
  4. Department of Trade & Industry’s latest petrol and diesel prices (January 2007), LPG from AA website (January 2007).

Will the rate per mile figures change if fuel prices go up or down?

We aim to provide employers with as much certainty as possible by keeping the fuel rates unchanged where there are modest variations in fuel prices. In line with the commitment made when they were introduced, they will be reviewed during a tax year only in the event of a variation in fuel prices of greater than 10% from the prices used at that time.

VAT

Customs will also accept the figures in the table for VAT purposes though employers will need to retain receipts in line with current legislation.

This document is based on Crown Copyright © 2011

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