Fleets need rapid clarification about how to apply the new split-level Advisory Electricity Rate (AER), according to the Association of Fleet Professionals (AFP).
From September, HMRC has published two rates for electric company car mileage reimbursement – 8p per mile for home charging, and 14p per mile for public charging.
AFP chair Paul Hollick said: “Alongside many others in the fleet sector, we were initially very welcoming of the change to a split-level rate, something for which we had been long campaigning in recognition of the widely different costs of private and commercial charging.
“However, the implementation has been confusing at best. AERs exist to provide businesses with a useful simplification when it comes to employees reclaiming fuel costs but the new system is almost unusable as it stands.”
HMRC advises fleets that, for journeys where a company car is charged both at home and in public, mileage should be apportioned based on how much charging happens at each location, adding that this calculation should be ‘fair and reasonable’.
However, Hollick said that more guidance was needed.
He said: “How that advice might be implemented is open to wide interpretation and few fleets are confidently proceeding. We require clarification about the methodology and evidencing that is required, especially where it needs to be coded into existing systems.
“Almost no-one wants to go forward risking they’ll adopt the new AER regime incorrectly and face considerable tax back payments and even fines at some point in the future.”
Hollick reported that most fleets were ‘playing it safe’ by using the 8ppm rate.
He added: “Only in instances where a driver exclusively uses highway charging can the 14ppm rate safely be used.
“Choosing the lower rate is the conservative option but means drivers who use a lot of commercial charging but some domestic continue to be left out of pocket, which is highly unfair. It’s especially difficult for fleet managers to explain to employees aware of the higher AER why they won’t be able to pay them the 14ppm rate.
“We very much believe this is an area where the authorities should be encouraging more drivers and businesses to adopt electric company cars by enabling fair, easy and accurate reimbursement of fuel costs, and this confusion is a definite disincentive.”
AFP deputy chair Lorna McAtear said the split rate was expensive to accommodate from a process point of view, with few fleets able to afford to rewrite their software to apportion rates.
She said: “An idea suggested when the new rates were first announced is probably the best and easiest solution, in our view.
“If a driver has a home charger, they sign a declaration stating that fact and are treated as an 8ppm claimant. If they don’t have a home charger, they sign a similar declaration to that end and claim everything at 14ppm. This is simple to administer and fair in the broadest sense.
“This method also enables fleets to easily add additional amounts to their ppm rate, if they so choose. Both the AERs are arguably too low, especially the higher level when drivers are using highway rapid chargers, and employers could boost the amount they pay easily because the process is so straightforward.”
Hollick said that the AFP, alongside other organisations representing the fleet sector, was collecting evidence to show HMRC how further action was required to make split level AERs practical.
He said: “We have a good relationship with the tax authorities and they listen to our feedback but their approach is very evidential. They’ll want to see proof the situation exists as we describe it before further action is taken and then will need to spend time arriving at a solution that works for them and for fleets.
“Our view is that rapid clarity is needed by fleets but the reality is that arriving at a positive outcome could take some time, which is frustrating.”
