Fleet News

HMRC apologises for about-turn confusion on advisory fuel rate

HM Revenue and Customs (HMRC) has issued an apology after fleets were given the wrong advisory fuel rate (AFR) following a quarterly update.

The new rates, which are published on HMRC’s website, initially showed that the figure for petrol-engined vehicles above 2000cc had fallen by 1p per mile (ppm), from 21ppm to 20ppm, and the rate for LPG vehicles above 2000cc had increased by a penny a mile, from 13ppm to 14ppm.

However, after the new rates had been widely circulated and employers had updated payroll systems ahead of the March 1 change, HMRC amended its figures again. This time it showed that the petrol rate had increased by 1ppm, not fallen as originally stated. The new rate would therefore be 22ppm.

The increase to 14ppm for LPG vehicles above 2000cc remained effective from March 1.

An HMRC spokesman said: “We had previously published an incorrect figure of 20ppm and apologise for the error.”

Debbie Floyde, a director at fleet representative body ACFO and group fleet and risk manager at Bauer Media, told Fleet News: “Publishing the wrong advisory fuel rate will have caused a major payroll headache for hundreds if not thousands of fleet operators. What’s even more frustrating is HMRC didn’t publicise the fact it had made an error, potentially leaving some employers still using the original figure.”

Many employers use AFRs as the guide figure to reimburse company car drivers for business travel because if they don’t exceed the rate there is no taxable profit and no Class 1A National Insurance to pay.

However, if they pay figures higher than the advisory rates and can’t demonstrate the fuel cost per mile is higher, they will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.

Company car drivers could have been out of pocket if employers had not been made aware of the subsequent change.   

Floyde concluded: “HMRC must let the industry know if a mistake like this occurs again; we can’t afford to be kept in the dark.”

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  • Narinder - 20/03/2017 09:27

    I only found out of the error because of Fleet News' article.

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