Advisory fuel rates (AFRs) can be used by employers to calculate fuel costs for tax purposes. They may apply to company cars when an employee is required to repay the cost of fuel used for private travel or when the company reimburses an employee for business mileage. The rates are not binding so less can be paid, but detailed documentary evidence of actual fuel costs will be required if the employer wishes to pay a higher rate and claim the full costs against tax.
Companies may be able to reclaim the VAT element of business fuel costs, provided there are mileage records and VAT receipts to cover the expenditure.
Income tax and NI
No tax or NICs will arise where an employee is reimbursed at less than or equal to the AFR on business mileage.