An in-depth Analysis of Advisory Fuel Rates for VAT

There had been many changes recently to the rules affecting income tax and VAT where you pay for fuel. This is mainly related to fuel used by your employees for private journeys. What are these changes and how might they affect your business?

If it is a practice of your business to provide directors or employees with cars or pay for their fuel, you better be aware of the tax and national insurance complications involved. But to make matters worse HMRC has now decided to update his advisory fuel rates (AFR) every quarter.

Advisory fuel rates are aimed at helping employers and employees who drive company cars. The intention is to help them to avoid paying excessive tax. These can accidentally be triggered where an employer pays for petrol etc. Once the fuel is in the tank it’s almost inevitable that the employee will use some of it to make a private journey, e.g. commuting to work. Unless the employee reimburses the full cost of this fuel, potentially swingeing income tax and NI bills will apply. However, where an employee reimburses the employer at the AFR, no tax or NI is due.

More frequent changes to AFRs mean more work to keep track of. Employers should make a note in their diary to check for new rates each quarter As an employer, keeping a track on all these is a taxing issue. That is why you should get in touch with an experienced accountant to sort out these issues. Contact KVS Accountants on 020 7731 6131 for advice on accounting and tax implications. KVS acts as accountants in Putney, Earlsfield, Fulham, Battersea, Wandsworth, Roehampton, Wimbledon and West Kensington.


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