Taxflash: Mileage rates – September 2019

Company car users: further changes to tax free fuel rates from 1 September 2019.

HMRC regularly publish approved ‘fuel only’ rates which have, again, changed.

These rates apply if you are provided with a company car by your employer and you;

  • claim a mileage allowance from your employer solely for the cost of fuel used on business journeys, or;
  • repay your employer for fuel used on private travel – including that between your home and normal workplace.

If you use the approved rates, you have certainty that you are claiming no more than the true cost of fuel used on business journeys and so will not be taxed on a ‘fuel benefit’.

The rates last changed on 1 June 2019 and have now been amended with effect from 1 September 2019. Overall, some of the permitted rates have reduced for all types of fuels over 1400cc – apart from mid-range LPG cars which has increased.

If you have been either claiming more for business mileage, or repaying less for private mileage than the HMRC official rates, HMRC’s view is that fuel for private travel is provided by the employer. The car driver is therefore taxed on the fuel benefit scale charge, unless the car user meets the cost of all fuel used privately. There is, therefore, a risk that company car drivers who might have
inadvertently paid a few pence less for their private travel, or who have claimed more from their employer than the official rate, will be
taxed on the full fuel scale benefit.

This in effect assumes that up to £8,917 worth of private fuel has been provided and could add up to £4,012 to their annual tax bill following recent increases in the level of the benefit.

The tax cost can equate in general to more than 20,000 miles worth of fuel. Employers would also be hit with extra Employer National Insurance on the fuel benefit.

The new rates effective from 1 September 2019 are as follows (previous rates, if different, shown in brackets):

ENGINE SIZE  PETROL  DIESEL   LPG
Petrol 1400cc or less 12p 8p
Diesel 1600cc or less 10p
Petrol 1401 to 2000cc 14p (15p) 10p (9p)
Diesel 1601 to 2000cc 11p (12p)
over 2000cc 21p (22p) 14p 14p

 

Whether you pay your employer for fuel used on private travel, or claim business mileage from your employer, you should now increase the amount you repay or claim from your employer as appropriate.

The rate per mile for fully electric cars remains at 4p.

Where employees are paid mileage allowances rather than being reimbursed the cost of their fuel, the business can either account for a scale charge or claim input VAT on fuel for the actual business mileage, depending on whether the mileage allowances covers all mileage or just business mileage. Note that the new scale charge regime is based on CO2 emissions. Subject to a scale charge being accounted for where required, the business can reclaim input VAT out of the fuel element of the mileage allowance. The fuel rates are the same as in the table above and are treated as inclusive of VAT for reclaiming input VAT.