Fleets and drivers win in HMRC fuel rates shake-up
20 November 2007
Cars running on modern petrol have a lower list price than diesel equivalents
HM Revenue and Customs has simplified the way advisory fuel rates are decided and published.
The rates, paid to staff driving company cars on work business, are subject to continued scrutiny and controversy as fuel price rises can leave drivers subsidising their firm's work mileage. The rates are also used by firms that pay all company car fuel and then charge back the private mileage to the driver.
Historically, HMRC reviews have been triggered only when fuel cost fluctuated by at least 10% compared with the price that rates had been calculated against.
HMRC will now review rates twice a year, implementing any necessary changes on 1 January and 1 July if there has been a fluctuation of at least 5% and promising to give a month's notice ahead of any changes. This means the new AFR figures should be released at the beginning of December.
At present, HMRC payment rates, last reviewed on 1 August, are based on diesel priced at 97.2p per litre and petrol at 96.6p. The latest figures from fuel card provider Arval puts the national average fuel price at 105.1p and 101.2p respectively, a rise of more than 5% but less than 10%, which would mean a review under the new system.
Fleet operators' trade association ACFO worked with HMRC to devise the new method and welcomed the moves, claiming fleets and company car drivers will both benefit. "Now that the HMRC tax-free rates will be reviewed more frequently, company car drivers will not be left financially out of pocket," said ACFO director Stewart Whyte. "These moves enable companies to diarise and plan. It will take the pressure off corporate HR and expenses departments, which often find themselves under fire when fuel prices rise and reimbursement rates don't immediately fall in line."
But James Comrie, head of Alliance & Leicester's fleet funding division has called for AMAP rates to be reviewed on a regular quarterly basis within a fixed framework. Speaking exclusively to BusinessCar, Comrie said: "The rise in fuel prices mean some drivers may now be worse off under a cash scheme."
|New Advisory fuel rates per mile from 1 August 2007 (previous figure in brackets)|
|1400cc or less||10p (9p)||10p (9p)||6p (6p)|
|1400cc-2000cc||13p (11p)||10p (9p)||8p (7p)|
|Over 2000cc||18p (16p)||13p (12p)||10p (10p)|