HMRC has updated its company car Advisory Fuel Rates (AFRs) with effect from 1 December 2015. The new rates apply from that date, though  employers do have an option of retaining the previous rates for one further month i.e. until 1 January 2016 if they prefer.

The new rates are shown below.

Note: HMRC normally reviews AFRs on a quarterly basis, and these slight reductions to the previous rates are intended to reflect recent trends in fuel prices.

The tax treatment of company cars is significantly different from company vans. From an income tax perspective, company cars are subject to relatively high charges based on the list price (rather than actual value) and CO² rating of the vehicle, and company car fuel remains an ‘all or nothing’ benefit, which is becoming more punitive (i.e. tax-ineffective) with each passing year.  Vans or ‘commercial vehicles’ on the other hand have, generally more lenient, fixed rate taxable benefits applied. These can even be reduced to NIL if the only private use is incidental or incurred on ‘ordinary commuting’. In addition the employer may be able to secure a VAT input tax deduction on the purchase in appropriate cases, significantly reducing the overall net vehicle cost.

Whilst this may encourage both employee and employer toward the ‘van’ rather than the ‘car’ route, it can be difficult to tell the difference between the two types of vehicles.  Please click on this link to obtain our free technical update news item on this topic.

If you require additional information please contact the ET4B team.

Please click below to obtain a PDF copy of ET4B’s free Autumn 2013 Newsletter.

ET4B Autumn 2013 Newsletter

In our Autumn newsletter we consider a number of topical items including updates on RTI, pension auto-enrolment/tax relief and defining cars/vans.

017_ET4B Autumn 2012 Newsletter

This Newsletter contains details of recent employment status and IR35 issues, an RTI update, and information on other topical employment tax matters