In the latest announcement from HMRC, there have been some changes to the AFR. 

Petrol vehicles have had their rates decreased by one pence per mile (ppm) for every displacement while diesel vehicles have decreased by one ppm for every displacement except 2,001cc and over, where they have decreased by 2. LPG vehicles have remained the same as the December AFR on vehicles with 1,400cc and below and those with 2,001cc and over. Those LPG vehicles with displacements between 1,401cc and 2,000cc have decreased by one ppm.

The AFR rates apply to all journeys on or after 1st March 2016 and for one month from the date of change, employers are able to choose to use either the previous or new current rates. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

Use of AFRs (Advisory Fuel Rates)

AFRs can be used to negotiate dispensations for mileage payments for business travel in company cars.

They are meant to reflect actual average fuel costs at the time they are set and save time for both employers and HMRC by setting out some figures that can be used in the majority of cases. They give employers more certainty about what the mileage rates that they choose to apply mean for tax and National Insurance contributions (NICs).

The rates only apply where employers:

  • reimburse employees for business travel in their company cars
  • or require employees to repay the cost of fuel used for private travel

The rates are advisory only.

Current and past AFR rates can be seen here on Comcar at http://www.comcar.co.uk/afrs.

Information is also available on the HMRC website at https://www.gov.uk/government/publications/advisory-fuel-rates