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ACFO demands clarity on new AFR rates

Date: 09 December 2010

Senior officers at the Association of Car Fleet Operators are to seek an official meeting with the Treasury to clarify the latest advisory fuel rates (AFR) for the reimbursement of fuel bought on business journeys.

ACFO claims the new rates are based on historic data and do not take account of the VAT rise of 2.5% that will come into force on 4 January. This means that even more company car drivers than at present will be out of pocket and subsidising their company mileage.

The new rates were announced by HMRC on December 1 and are supposed to be effective for six months, running until June 2011. There are minor adjustments on the previous rates including one band (diesel over 2.0 litres) that has actually gone down (see table, below).

ACFO director, Stewart Whyte, said: "We have been in long running discussions with HMRC about these rates but the Treasury have always refused to look at it.

"The latest rates are based on fuel prices from a couple of weeks ago and they have not factored in the VAT increase. In fact, only a couple of the AFRs have changed, but does anybody really accepted that fuel prices have not gone up in the last six months?

"We want to tackle the formula head on with the Treasury. The implementation of the rate changes is correct but the formula is wrong."

Whyte said around 70% to 80% of business car drivers are reimbursed through the AFR scheme and would lose out as a result of the mistake. Business car operators would not be affected because they are able to reclaim the VAT-element of the repayments.

HMRC does have the power to change the rates in exceptional circumstances, such as when fuel prices fluctuate by more than 5% from those used in the existing calculations.

HMRC Advisory Fuel Rates – Dec 2010 (change on June 2010)
Engine sizePetrolDieselLPG
1400cc or less13p ( 1)12p ( 1)9p ( 1)
1401 to 2000cc15p (-)12p ( 1)10p (-)
Over 2000cc21p ( 1)15p (-1)15p ( 1)

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