Matt Sutherland's blog: We need Advisory Fuel Rates for electric now
09 August 2017
It's no secret that company car drivers have rallied behind electric vehicles (EVs) and plug-in hybrids (PHEVs) over the past few years in a bid to reduce their tax, carbon footprint and fuel costs.
With many more EVs and PHEVs in the pipeline from manufacturers, significant increases in vehicle range (at an affordable price point, such as with the new Renault Zoe) plus public and private investment in our charging infrastructure, the number of us choosing electric or hybrid will only grow further.
This is good news and we have seen the adoption of EVs and PHEVs by fleets and company car drivers significantly eclipse take-up of alternative fuel vehicles by private buyers. But while we are making progress, it's still a new technology with practical challenges and higher upfront costs. So there's still a lot more that can be done to increase take-up and mass adoption - but one of the more practicable actions that can be done is to publish Advisory Fuel Rates (AFRs) for electricity.
Many UK businesses, whether they are large Corporates or SMEs, want to ensure they are prepared for the changes demanded by the low emission future of transport. Many do not find it quite as daunting as it used to be, as range anxiety and the move away from traditional internal combustion engines (ICE) can be overcome by making sure that the right vehicles are chosen and suitable for the journeys being made.
However, accurate Advisory Fuel Rates for electric (e-rate) are non-existent. The absence of defined reimbursement rates at present puts off some companies wanting to add plug-in vehicles to their choice list. This is because calculating reimbursement rates manually and then getting them approved by HMRC takes time and effort - a resource many business decision-makers cannot spare. It seems a complete anomaly that while HMRC publish Advisory Fuel Rates for diesel and petrol on a quarterly basis, the Government is still lagging behind in publishing a rate for a fuel that is a stated social, environmental and economic priority for them.
Publishing a rate for electricity would be an effective and immediate way to overcome some of the remaining objections to EVs and PHEVs in the fleet and corporate market. The publication of an AFR on electricity is a simple, practical step that would help reduce some of the remaining confusion and uncertainty among businesses about electric and hybrid vehicles. It would sit comfortably alongside other, much-needed financial incentives provided by the Government to support this leap in technology, whether that is in the form of OLEV grant or grants for home and workplace charging.
The rate needs to be straightforward and non-labour intensive, just like the current system used for petrol and diesel vehicles, otherwise people would not be encouraged to switch. Unfortunately, this has been an ongoing discussion topic for the fleet industry and HMRC for nearly five years. Now is exactly the right time to act for the benefit of UK businesses as well as combat the UK's air quality problem.