A protest by the Chartered Institute of Taxation (CIOT) has led to the government giving employers some leeway over the recent reduction in the fuel advisory rates.
HM Revenue & Customs announced changes to the rates, which allow for the reimbursement of the cost of fuel for business miles accrued by company cars, on January 29th.
Reduced rates were due to come into effect on February 1st but the CIOT argues that this did not provide enough notice for some employers to implement the change.
As a result, HMRC has agreed that employers having practical difficulties implementing the new lower rates can continue to use the older higher rates for a further month, until February 28th, without having to take account of the income tax, NIC and VAT implications of paying allowances at the higher rate.
Dispensations included
This also extends to those employers with dispensations for fuel rates that are linked (usually by a formula) to AFRs.
CIOT adds: "These rates are also accepted by HMRC for the calculation of the VAT element of mileage rates generally".
In the future, HMRC intends to consult with representative bodies about how future rate changes will be made.
One proposal is to implement changes in line with fuel costs on fixed dates each year, for example on February 1st and August 1st.
Those with comments should email technical@tax.org.uk with 'FAO Matthew Brown - Advisory Fuel Rates dates' as the subject line.
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