HMRC advisory fuel rates

What are HMRC advisory fuel rates used for? To understand HMRC advisory fuel rates, a few factors should be taken in to consideration, such as: Fuel cost is a business expense if the travel is a work trip. Entities usually reimburse employees for a business expense so as long as no profit is made from a business expense, it is not subject to tax or Class 1A National Insurance fees. Therefore, companies can reduce their tax and insurance bills significantly when they recognise and reimburse fuel expenses. HMRC has standardised the amount which employers can reimburse free from tax because petrol prices and fuel efficiency vary. When an employee purchases petrol for a work tour, they are paid back by their company at a specified rate. When do HMRC fuel rates apply? HMRC business fuel rates apply in two specific cases: Employees repaying the cost of private travel in company cars: When employees use company cars for personal trips, they must repay the company at a rate that is equal to or higher than advisory fuel rate. It is also possible to use another rate if the employee has covered the total cost of the private trip. Reimbursement for work travel: The company can reimburse employees for fuel cost incurred during work travel, up to the amount allowed by HMRC. Company can choose to reimburse employee at a lesser rate than advisory rate if the company car is more efficient. It is also possible that employee is reimbursed at a higher rate if the company car is less fuel-efficient. If you reimburse at a higher rate and can’t show that this was necessary, the excess will be treated as taxable profit and will be subject to tax and national insurance.