Tax and Travel

Car and fuel benefit

The taxable petrol and diesel car benefit is based on the car's CO2 emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first line of figures in the table relates to qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2009/10 remains at £16,900.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

• 2% for cars manufactured to be capable of being run on E85 fuel
• 2% for bi-fuel cars or those which run on LPG only
• 3% for hybrid electric and petrol cars
• 6% for electric only cars (in practice the taxable benefit will be 9% of the price).
  

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge. The table below shows the VAT chargeable for quarters commencing on or after 1 May 2008.

Changes from April 2011

The Chancellor announced changes which will take effect from 6 April 2011:

• the lower emissions figure will be reduced
• the £80,000 price cap will be abolished
• the reductions for cars using various alternative fuels will be abolished.

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge.

The table above shows the VAT chargeable for quarters commencing on or after 1 May 2009. The last two columns take account of the change of the standard rate of VAT from 15% to 17.5% with effect from 1 January 2010.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates at the time of the Budget are as follows:

The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs –Vehicle Excise Duty (VED) rates

Vehicle Excise Duty ('Car Tax') rates also reflect emissions, with lower scale rates for cars using alternative fuels. The number of VED bands has been increased from seven to 13. The following table shows the rates which will apply for cars registered on or after 1 March 2001:

Car costs - VED rates

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.