BUSINESS JOURNEYS IN A COMPANY CAR
If an employee (or director) has the use of a company car, but has to buy his own petrol, the company will usually pay for fuel used on business journeys.  The Inland Revenue has published a table of ‘fuel only’ mileage rates, which may be paid tax-free.  The rates, which depend on the engine capacity, for 2004/05 onwards include an LPG rate and are as follows:
 

Engine Size

Rate per mile – petrol

Rate per mile – diesel

Rate per mile – LPG

Up to 1,400cc

10p

9p

7p

1,401 to 2,000cc

12p

9p

8p

Over 2,000cc

14p

12p

10p

An employer wishing to pay ‘fuel only’ mileage allowances for business journeys in company cars at a higher rate should ask the Inland Revenue to authorise it as part of his PAYE Dispensation agreement.  Higher rates can be negotiated where, for example, the employee has to use a four-wheel vehicle to cover rough terrain.