HMRC confirms new business fuel rates
12 July 2006
HM Revenue & Customs has announced new advisory fuel rates for company cars. Taking effect from the beginning of this month, the rates generally rise by a penny per mile, though it's 2ppm for petrol engines over 2.0-litres, and there's no change to LPG rates for smaller engines (see table).
These rates will stand until further notice, with HMRC not making adjustments to allow for fuel price rises until there's a variation of at least 10% from the per litre price used. Petrol and diesel pump prices are taken from the Department of Trade & Industry's figures, with LPG figures from the AA. That means petrol would have to hit 107.1p per litre, and diesel 109.8 before rates would be reviewed.
HMRC works out what it feels is a fair rate by taking an average mpg figure across all cars in each engine size group, adjusted by sales, and then adjusts it downward by 10% to take into account real-world driving and older cars with worsening fuel economy. The only exception is LPG, where it's adjusted down by 20% due to the fuel's less economic returns. There's no average MPG for LPG cars because of the number of aftermarket conversions.
See www.hmrc.gov.uk/cars/advisory_fuel_current.htm for more details.