HM Revenue and Customs has published new Advisory Fuel Rates, which employers use to reimburse employees for business travel in their company cars, or when they require employees to repay the cost of fuel used for private travel.

They provide a range of rates based on engine size and fuel type and when used, are deemed to be tax-free.

The new rates, which take effect on June 1 (previous rates are in brackets) are:

Engine size            Petrol                       Diesel               LPG
1400cc or less       12p (11p)               11p (11p)        8p   (7p)
1401cc to 2000cc  15p (14p)               11p (11p)        10p (8p)
Over 2000cc          21p (20p)              16p (14p)        14p (12p)

• Petrol hybrid cars are treated as petrol cars for this purpose.

The rates, which are expected to be reviewed again in November, have gone up by 1p per mile for each category of petrol cars but have remained the same for all but the highest capacity of diesel-powered cars.

The new rates are based on petrol pump prices of 119.9p a litre and diesel prices of 121.9p a litre as of Monday (May 24) and calculated by the Department for Business, Innovation & Skills. The previous AFRs were based on pump prices of 108.7p a litre for petrol and 109.9p a litre for diesel.

Earlier this year ACFO (Assoiciation of Car Fleet Operators) warned that many company car drivers were reluctant to undertake business travel because they were effectively subsidising their employer for every mile covered due to ‘low’ AFRs and the comparatively high price of fuel.

In publishing the new rates, HMRC said: ‘These rates apply to all journeys on or after June 1 until further notice, allowing them to reflect fuel prices more quickly. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’