SMEs with company car fleets need to advise their administrators and drivers that H M Revenue & Customs (HMRC) has updated its advisory fuel rates (AFR) for company cars with immediate effect from 01 March.

The new AFR rates, for all mileage undertaken from 01 March, in most cases sees the amount rate per mile rise by 1p per mile for petrol, diesel and LPG-fuelled company cars.

HMRC says it has increased the rates due to the increasingly high cost of fuel.

The AFRs can be used for either paying the fuel cost incurred on business mileage in a company car, or reclaiming the private mileage element for company paid fuel, thus avoiding free fuel benefit in kind taxation.

By using the advisory fuel rates, drivers and companies will not have to pay tax or National Insurance contributions on them.

The advisory fuel rates do not apply to business mileage undertaken in private cars - these payments are the Approved Mileage Allowance Payments (AMAPs). These have remained static at 40p per mile for the first 10,000 miles since 2002.

For hybrid cars, use the petrol figures.

Advisory Fuel Rates from March 2011

• Engine size 
1400cc or less: 14p (petrol); 13p (diesel); 10p (LPG)

• 1401cc to 2000cc: 16p (petrol); 13p (diesel); 12p (LPG)

• Over 2000cc: 23p (petrol); 16p (diesel); 17p (LPG)

Author Ralph Morton is editor & publisher of Business Car Manager magazine (www.businesscarmanager.co.uk). He was named Business Writer of the Year in the Guild of Motoring Writers Awards and can be contacted at editor@businesscarmanager.co.uk