Where an employer provides a company car, but the employee pays for the fuel, the employer may pay a mileage allowance for business journeys.
Payments that do not exceed their published ‘advisory fuel rates’ (AFRs) are reimbursements of expenses and are not subject to Class 1 NIC or Income Tax.
The rates are reviewed every three months 1 March, 1 June, 1 September, 1 December. With effect from 1 March 2012:-
up to 1400cc 15p
1401 to 2000cc 18p
over 2000cc 26p
Petrol includes hybrid cars
up to 1600cc 13p
1601 to 2000cc 15p
over 2000cc 19p
Up to 1400cc 10p
1401 to 2000cc 12p
over 2000cc 18p
These rates may also be used to reclaim input VAT in respect of fuel used for business journeys (remember to keep receipts)
The ‘advisory fuel rates’ scheme does not apply in any circumstances to business or private travel in a company-owned van.