The workings of Advisory Fuel Rate

Understand how Advisory Fuel Rate works

What do you need to know about Advisory Fuel Rates?

Advisory fuel rates are HMRC’s recommended repayment amounts for reclaiming the fuel-related portion of business mileage. These rates are only applicable to companies that are VAT registered and can only be used by companies that are Standard Rate VAT Registered and not those who are registered for Flat Rate VAT. 

We recommend that you speak to a qualified VAT accountant to help you choose the best VAT scheme for your business.

You can use advisory fuel rates to help you calculate:

• The total reclaimable VAT on business mileage when using a personal vehicle
• The amount employers can reimburse their employees for business travel in company vehicles 
• The amount that employees have to reimburse their employers for personal travel in company vehicles

What are the Advisory Fuel Rates in 2020? 

HMRC has issued new advisory fuel rates that will come into effect from 1st March 2020. 

If employers reimburse their employees for travelling in the company vehicles for business purposes, then there isn’t any Class 1A National Insurance payable. 

Learn more about National Insurance and when it is applicable and speak to our tax accountants who are specialists in National Insurance.

HMRC Advisory Fuel Rates 2020 (applicable since 1st March 2020) 

HMRC Advisory Fuel Rates 2020 (applicable from 1st December 2020)

You can use the previous rates for up to 1 month from the date the new rates apply. 

Examples to help you understand how to apply advisory rates in different situations:

Video:What car expenses you can Claim?

Watch the video to know all about the car expenses and how can you claim them?

Reclaiming VAT on a personal car:

George travels 80 miles for a business trip in his personal car. Before starting his journey he fills up £50 worth of gas on his 2500cc engine car. 

The fuel rate applicable in George’s situation is 20p as his car’s engine is 

2500cc. So £16 out of £50 is attributed to the business trip. This £16 is inclusive of VAT, so the VAT element of the business mileage that he can claim is £ 2.67. 

Claiming mileage on a Company Car:

Charles bought fuel for his company car while travelling 450 miles for work. The engine capacity of the car is 2500cc. The advisory rate of this car is 20p per mile, so the employer will reimburse Charles £ 90. 

Reimbursing employers for the personal use of a business vehicle:

Emma fueled her company car and took a personal trip of 150 miles. As per the advisory fuel rates, she will have to pay her employer 11p/mile as the company car has a diesel 1650cc engine. So, Emma will have to pay her employer £16.50. 

Not all circumstances are straightforward, we advise you to speak to our expert qualified accountants, who can help you with any and all VAT related questions and issues. 

You can learn more about the car expenses you can claim from our in depth guide.

Should I hire an Accountant for VAT? 

In short, yes, you should hire an accountant. By seeking the expertise of professional accountants, you can mitigate errors that might lead to hefty penalties. 

Accountants also help you gather and compile all of your company’s financial records in a succinct and functional manner. They can help you work out your business expenses and may also help you identify valuable tax reliefs which otherwise you may overlook or ignore. Accountants can advise you on applicable laws and regulations such as advisory fuel rates that you can avail without having to file dispensation.

Clear House Accountants are highly competitive Accountants in London who have experience working with thousands of clients on a variety of different business issues.

Jibran Qureshi

Managing Director

+44 (0)207 117 2639

info@chacc.co.uk

chacc.co.uk

Author Bio

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Jibran Qureshi FCCA  is the Managing Director of Clear House Accountants, and has over 10 years of experience in practice and across multiple industries. Jibran’s educational background includes a Master’s in Financial Strategy from Oxford University and an Executive MBA from Hult International Business School. His experience in Financial Strategy, Tax Planning, Operational Consultancy and Performance Reporting guide his cognizant approach to leading Clear House and its clients to the future. It was this dexterity that led him to be Enterprise Nation’s Top 50 Advisors.  

Jibran is fueled by his passion for helping businesses. He unequivocally believes that as business advisors and accountants for our clients, it is our responsibility to work with them as business partners. As specialists, it is our duty to help our clients navigate through the complexities of constant change and the implications that come with it. 

Over the past decade, innovative disruptions have changed the way businesses work, everything from cloud software, innovative business models, to AI and machine learning, have impacted how businesses operate, grow, and expand. 

Jibran recognized the need to manage these disruptions sustainably, early on and shaped Clear House Accountants to not just be compliance specialists, but advisors who help build complex ecosystems around cloud accounting software, provide advice on funding support, help manage innovative tax  schemes, set up and implement complex strategic plans, and much more.  So, his clients can thrive, not just survive. 

Jibran developed his prime role as the Managing Director to build Clear House’s capabilities so it can add value for their clients. He is of firm belief that this can be done through consistent  high-level training, building the right tools, and creating roadmaps to help businesses cope with prospective disruptions.  He envisages that every client that comes on board, is provided maximum value through onboarding, ongoing services and the right mix of tools to help them become the best in the world.

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