Notice of advisory fuel rates withdrawn

HMRC are to withdraw the month’s notice given on advisory fuel rates when the latest figures are next announced later this month.

The department announced that ‘employers making or collecting payments at the superseded rate, because they have not been able to change their systems in time, should make or require a second payment in respect of the same period in order to apply the new rate from its effective date’.

This means that if the rates increase, firms will be able to adopt the new rates from a later date, but if they decrease, employers will have paid mileage in excess of the taxman-approved rates. 

Baker Tilly’s head of tax, George Bull, said: ‘If rates rise, employers will have to judge whether it is worth the effort of making retrospective adjustments to make up the difference.

‘But if the rates fall, HMRC seem to be insisting that employers should recover excess payments from the employees who received them. That might be illegal if the rates payable to the employees were a contractual right, leaving the employers with the problem of reporting benefits in kind in the form of overpayments of mileage allowance which in many cases are likely to be minuscule.’

Mr Bull added that bearing in mind ‘it is HMRC who has removed the lead time that would have allowed employers to change their systems’, it would be preferable ‘to require employers to apply the new rates as soon as is practically possible after the change, taking account of when it is announced, rather than impose a disproportionate administrative burden on employers’.

Employers are not obliged to apply the advisory rates and can use any amount they think is realistic for the relevant vehicle, provided they can justify it to the Revenue.

Issue: 4232 / Categories: News , Employees , Income Tax