Latest Business Car Manager News: Company Car businesses are being hit by New Business Mileage Rates.

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Business Car Manager and other company car lending organisations are watching closely, as the latest rise in fuel costs will significantly affect company car drivers.

Both petrol and diesel company car drivers have seen fuel prices increase by over 3 pence per litre during Augus

Company car drivers will be hit by rising fuel costs as HMRC pegs the latest advisory fuel rates (AFRs), which can be claimed for business mileage.

The new business mileage rates are to be used from the beginning of September, and will not be reviewed again by HMRC until the end of November.

The AFR rates are used by company car drivers to reclaim business mileage undertaken in company cars – or to repay private mileage if a business pays for all the fuel in the company car. And avoid ‘free fuel’ benefit in kind tax.

In between now and the beginning of December, when new AFR rates will be announced, company car drivers will face increased fuel costs in the run up to Christmas.

The AA’s fuel prices index reported that August average fuel prices increased by 2.5%. Unleaded rose to 135.5ppl (up 3.3ppl) and diesel rose to 140.4ppl (up 3.1ppl). The AA said that the underlying trend was for this to continue as wholesale prices had risen.

For those drivers using the aternative LPG fuel, the pence per mile rate has actually dropped by 1-2p depending on engine size.

“There is bound to be some reaction from drivers against the decision to hold the AFR rates just as fuel prices are once again hitting their wallets,” commented Paul Jackson, managing director of mileage expense audit firm TMC.

“Businesses should always bear in mind that the AFRs are only intended as a convenient guideline to the maximum amounts that drivers can claim for fuel, without supporting evidence from mileage loss and purchase receipts, without incurring liability for benefit-in-kind tax.

“In practice, many SME fleets require drivers to settle their fuel claims on an actual cost basis, as this eliminates any arguments over the fairness of mileage rates.”

Jackson said that there were further advantages of going down the actual cost route with an automated business mileage capture process. This included better management information, reduced paperwork around expenses settlement and, with effective audit controls in place, HMRC business car tax compliant records.
Advisory Fuel Rates from 01 September 2012 for petrol and LPG cars

Engine size 1400cc or less: 15p (petrol); 10p (LPG)
1401cc to 2000cc: 18p (petrol); 12p (LPG)
Over 2000cc: 26p (petrol); 17p (LPG)

Advisory Fuel Rates from 01 September 2012 for diesel cars

Engine size 1600cc or less: 12p
1601cc to 2000cc: 15p
Over 2000cc: 18p

Keep up to date with the latest events in our business car news section but don’t use new media in your car unless its hands-free and look at what we say in our company car driving advice pages.

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Conrad Swailes
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