Company Car Tax Guide

Dispensations Not Drawn In Terms Of The Advisory Fuel Rates

Many dispensations contain rates at which employers are entitled to reimburse employees for fuel which the employee has purchased for business mileage in a company car (including a pool car) without any tax or NICs implications. Some of these dispensations quote specified rates per mile, others refer to the advisory fuel rates.

From 1 July 2005, HMRC will interpret all such dispensations (but not any in relation to vans, to which the advisory fuel rates do not apply) as though they referred to the advisory fuel rates unless the specified rate is higher. We will not issue revised dispensations, nor will employers need to apply for one, in order for this change to take effect. Either side can, of course, review other aspects of existing dispensations in the normal way.

This does not mean that employers must pay higher rates than their own policies require. It simply allows dispensed rates to be varied centrally, relieving both sides of the administrative burden of regular updates for this single purpose.

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