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Plug-in AFRs do not go far enough, ACFO says

Date: 21 August 2018   |   Author: Sean Keywood

The fleet operator organisation has claimed a partial victory after new rates for fully electric vehicles were announced - but the exclusion of plug-in hybrids means there is still work to do. Sean Keywood reports.

The introduction of new Advisory Fuel Rates (AFRs) for fully electric vehicles (EVs) has received a mixed reception from fleet operator organisation ACFO.

It has hailed the move, which it has been told by HM Revenue and Customs (HMRC) will come into effect from 1 September, as a victory for its campaign for such rates to be introduced.

ACFO felt the absence of such rates was a handicap to some organisations including EVs on their choice lists, and says the introduction of the new rate - to be known as the Advisory Electricity Rate, and set initially at 4p per mile - will help fleets to go green.

However, it is disappointed that there is no such rate for plug-in hybrids and range-extended EVs, and says therefore its campaign will continue.

The new rate will sit alongside the existing rates for petrol, diesel and LPG cars, which apply when employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel.

In its notification to ACFO, HMRC said, "HMRC will accept that if employers pay up to the Advisory Electricity Rate of 4p per mile when reimbursing their employees for business travel in a fully electric company car there is no profit - there will be no taxable profit and no Class 1 National Insurance to pay.

"On a similar basis to AFRs, employers can use their own rate which better reflects their circumstances if, for example, their cars are more efficient, or if the cost of business travel is higher than the guideline rate. 

"However, if they pay a rate that is higher than the AFR and can't demonstrate the electricity cost per mile is higher, they will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes."

ACFO chairman John Pryor welcomed the new rate, the introduction of which followed a sustained campaign by the organisation, including a petition that attracted support from managers of more than 120,000 company cars.

Pryor said, "I am delighted that HMRC has listened to the voice of ACFO and its members, and introduced an AFR for 100% electric cars and at the rate we recommended. 

"Historically, HMRC has consistently said that it did not consider electricity to be a fuel so for it to make this change is a major leap and will assist all fleets operating and seeking to introduce pure electric cars."

While pleased with the new rate, Pryor said the lack of an announcement on plug-in hybrids and range-extended EVs, which the campaign had also called for, meant it would go on.

Pryor said that a rate for plug-in hybrids would help incentivise drivers to use them more efficiently.

He said, "Plug-in hybrid models are a major part of vehicle manufacturers' future electrification programmes and, as a result, an increasing number of such vehicles will find their way onto company car choice lists due to their benefit-in-kind tax efficiency.

"But without an incentive linked to how such ultra-low emission vehicles are used on the road, it will not prevent drivers using the combustion engine alone in a plug-in hybrid car.

"Plug-in hybrid vehicles are at their most efficient when driven for as many miles as possible on electric power. Therefore, particularly with technology advances likely to increase the electric range of such cars, publishing appropriate Advisory Electricity Rates for plug-in hybrid cars will help to encourage drivers to use the car in the optimal environmentally friendly way."