HMRC publish rates that can be used by employers wishing to pay their employees the cost of fuel for business journeys in company cars (or, where the employer initially pays for all fuel, for reimbursement of private mileage by company car drivers to their employers). Hybrid cars are treated as petrol or diesel cars for this purpose.
HMRC’s guidance on fuel-only mileage rates for company cars confirms that employers are not obliged to use advisory fuel rates. Where an employer wishes to use them, they only apply where the employer:
- reimburses employees for business travel in their company cars; or
- requires employees to repay the cost of fuel used for private travel in those company cars.
If the employer pays more than the relevant advisory fuels rates and the payments are not an actual reimbursement, the excess is taxed (and subject to employees’ and employers’ National Insurance Contributions).
Rates applying from 1 June 2020 are as follows:
|1400cc or less||10p||–||6p|
|1600cc or less||–||8p||–|
|1401cc to 2000cc||12p||–||8p|
|1601cc to 2000cc||–||9p||–|
An Advisory Electricity Rate has been introduced for electric cars. The current rate is 4p per mile, though it should be noted that electricity is not a fuel for car fuel benefit purposes.
For employees using company cars, an employer may agree to refund the fuel costs using the advisory fuel rates, of employees carrying out volunteer work related to coronavirus, for example, delivering medical supplies including PPE. These refunds are a benefit and the employer may settle any tax and National Insurance contributions on the employee’s behalf by reporting through a PAYE Settlement Agreement.
The employer may also agree to fund the cost of fuel for volunteer mileage related to coronavirus. HMRC have advised that volunteer mileage should not be taken into account for the purposes of the car fuel benefit charge for company cars.
Any tax and National Insurance contributions due should be reported through a PAYE Settlement Agreement as a coronavirus related benefit based on the appropriate advisory fuel rate for the volunteer mileage.