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Advisory Fuel Rates – What is the VAT element of business mileage on Standard Rate

Posted by Tom West on Jul 1st, 2020 | Expenses

Crunch - Advisory Fuel Rates - claiming VAT element of business mileage - person filling up car

Advisory fuel rates are the recommended repayment amounts when you are reclaiming the fuel element on business mileage.

This applies to Standard Rate VAT registered companies only. They are used to calculate:

  • The amount of VAT to reclaim on business mileage in a personal vehicle
  • How much employers can reimburse employees for business travel in their company cars
  • How much employees need to reimburse employers for private travel in their company cars.

HMRC reviews these rates every quarter.

What are the current Advisory Fuel Rates?

From 1st September 2020, the new Advisory Fuel rates are:

Engine size Petrol Diesel LPG Electric*
1,400cc or less 10p 7p 4p
1,600cc or less 8p 4p
1,401cc – 2,000cc 12p 8p 4p
1,601cc to 2, 10p 4p
Over 2,000cc. 17p 12p 12p 4p

*Fully electric cars only. Hybrid cars claim at the petrol or diesel rate. Electricity is not classed as a fuel for car fuel benefit purposes.

Source: website Advisory Fuel Rates

Using the advisory fuel rates above, you can calculate what percentage of the business mileage rate applies to fuel and calculate the VAT on that element.

How do Advisory Fuel Rates work in practice?

Example One – reclaiming VAT on mileage

Jane bought petrol and travelled 100 miles in her own car with an engine capacity of 2500cc.

Based on an advisory rate of 17p per mile, £17 would be attributed to the fuel (out of the overall £45 mileage claim). As this £17 is VAT inclusive (that is, £17 equals 120% of the fuel cost), the VAT element is calculated by dividing the figure by 6 giving an amount of £2.83.

Example Two – paying employer for private fuel on a company car

Jack made a round trip of 50 miles to see relatives in a diesel-engined company car with 1600cc capacity.

50 miles at an advisory rate of 8p per mile means Jack will be required to pay £4.00 for the personal trip.

Example Three – claiming mileage on a company car

Helen bought diesel for her company car with an engine capacity of 1650cc, travelling 300 miles for work.

300 miles at an advisory rate of 10p per mile means the employer will reimburse Helen £30 for business miles.

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