HM Revenue & Customs have agreed to a transitional period for the introduction of new advisory fuel rates, originally set for February 1.

Employers now have until March 1 to introduce the new rates.

HMRC said: ‘Where employers have practical difficulties implementing the new lower rates, they can continue to use the older higher rates for a further month, ie to February 28, 2007, without having to take account of the income tax, NIC and VAT implications of paying allowances at the higher rate. This will allow time for drivers and employers to adjust to the new rate.

‘This treatment will extend to those employers with dispensations for fuel rates which are linked, usually by a formula, to AFRs. Employers can, however, use the new lower rate with effect from February 1 for employees with fuel cards who reimburse their employers for private fuel bought with a company fuel card.’

These rates are also accepted by HMRC for the calculation of the VAT element of mileage rates generally.

HMRC announced on January 29 that the fuel advisory rates are to be revised from the start of this month. Fuel advisory rates are the figures that HMRC publish as acceptable costs for the following:

1. The rate of reimbursement for a company car driver who is provided with business fuel
2. The rate of reimbursement for a company car driver for the costs of private mileage where the employer pays the full fuel costs
3. The rate a company can use to calculate the VAT element of a business fuel costs.

New advisory fuel rates.