Birmingham – based accountants JW Hinks wants to remind businesses that advisory fuel rates for company cars have changed.
Each quarter H M Revenue & Customs (HMRC) posts a list of advisory fuel rates (AFR) on its website, basing its calculations on the latest trends in prices at the pump. The AFR is then used by companies to claim back tax on business mileage for company cars or to reimburse private mileage to individuals using their own car for business use.
This quarter, HMRC has taken the decision to cut AFRs by 1p for diesel cars with engines larger than 2,000cc and petrol vehicles with engines over 2,000cc, along with those that have motors of 1,400cc and smaller.
This new rate is effective from 1 December 2014 and leaves the rate for other vehicles unchanged.
It is believed that this cut to the AFR is a response to the sharp decline in prices at the pump, which has seen average fuel prices drop to 121.18p for petrol and 126.11p for diesel, according to the government’s latest weekly road fuel price index.
These falling prices have occurred as a result of a slump in the world’s crude oil prices that have been driven by a surge in US shale gas and higher than expected levels of production in the Middle East – causing crude oil prices to fall to $73 a barrel.
While most of this saving is yet to be passed on to the average motorist it has resulted in prices falling. This, along with a freeze on fuel duty announced in the latest Autumn Statement, means that the burden of fuel costs has been somewhat alleviated in recent months.
Dan Morgan, Tax Partner at JW Hinks, said: “For a lot of firms the price of fuel has had a significant impact on their business in recent years and this change to AFR, along with the freeze on fuel duty, will certainly be welcomed by the majority of companies.
“It is good to see that HMRC is altering its AFR based upon actual fuel prices and shows that they are taking an active interest in what is happening.
“While not every motorist will benefit, it will certainly be a nice early Christmas present for all businesses and individuals who claim back tax on business mileage.”
Mr Morgan added: “Companies need to keep in mind that the price of crude oil remains unpredictable and they should prepare themselves for a rise or fall in future.”
If you would like help with this or any other issue, please contact JW Hinks on 0121 456. 0190