Saturday, 3 January 2009

New HMRC Advisory Fuel Rates

Many people are now aware of the Fixed Profits Car Scheme. For those who aren't, we covered it briefly in our post of 27 May 2008;
The question we often get asked is; "How do I claim VAT on the FPCS, if I'm no longer putting my petrol receipts etc through the business?"

In order to facilitate this, HMRC introduced the Advisory Fuel Rates. These are the deemed fuel elements of the FPCS, based on the engine size of the vehicle concerned, and the fuel used, and we are allowed to claim VAT based on these rates.

As of 1 January 2009, due to the current economic circumstances, the Advisory Fuel Rates have been increased. Full details are shown on the HMRC web site;

The Fixed Profit Car Scheme (FPCS) rates remain unchanged with the first 10,000 miles payable at 40p then 25p thereafter for cars, 24p for all mileage for motorcycles and 20p for all miles by bicycle.

Yes, that's right; we can claim 20p per mile simply for cycling to work. The Government are always pushing for us to become ‘greener’ and have put some incentives in place to encourage us down that route.

So if you fancy becoming ‘greener’ and fitter consider ditching the car and pedalling to work.
Basically your employer buys a bike and any equipment relating to it and hires it to you until you have paid back its full cost, usually over a year.

The tax break is facilitated because you pay for the bike by agreeing to reduce your monthly/weekly salary, before tax and NIC is deducted under the ’salary sacrifice scheme’. Paying in this way you can meet your repayments out of your pre-tax rather than post taxed income.

This can translate to almost a 50% cash discount on the price of a new bike. Higher rate tax payers will benefit more from the scheme.

The scheme applies to employees only, with a contract of employment and earnings that are at or above the national minumum wage level once the salary sacrifice has been applied.

So, if your new year's resolution was to 'get fit' this might be the option for you.