Change in fuel rates

Because of the recent steep rise in Oil prices, HMRC have updated the advisory fuel rates which can be used for working out the VAT element of a mileage rate. The changes apply from 1 June.

As a reminder, HMRC let you claim 40 p per mile for the first 10,000 miles a year travelled for business in your own car, and 25 p per mile thereafter. These rates are not changing.

What is changing is HMRCs so called advisory rate as to the fuel element of the mileage rate which is used for vat recovery.

The new rates are here: http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

For example, for a petrol engined car, the rate is 12 p per mile, so if you travelled 1000 miles on business:

Mileage claim = 1,000 x 40 p per mile = £400 - your business can pay this to you tax free, and your business claims tax relief on it.

VAT recovery = 1,000 x 12 p per mile x 7 / 47 = £17.87 to be claimed on your vat return.

Clients using our PSC spreadsheet will need to update the mileage rates manually. To do this:

1. open the worksheet called "Garbetts office use" (far right hand side)

2. find the table of VAT receovery rates for fuel, at line 28

3. assuming your Q1 was April, May and June 2008, you need to update the Q2, Q3, Q4 and Q5 columns (i.e. cells E32 to H41).

The new entries are:

Diesel<2000cc 0.13
Diesel>2000cc 0.17
LPG<1400cc 0.07
LPG>2000cc 0.13
LPG1401-2001cc 0.08
No vat claim/not vat registered nil
Not specified nil
Petrol<1400cc 0.12
Petrol>2000cc 0.21
Petrol1401-2001cc 0.15
Claim vat 0.05
No vat claim nil

4. Save your sheet

NB the new rates offically apply from 1 July, but HMRC have said they can be used from 1 June - sorry, our spreadsheet will not cope with a mid quarter change of rates but it would only be a few pounds extra vat receovery for most clients, if that.