More company car drivers losing out under latest AFRs, TMC warns
05 April 2019
Author: Sean Keywood
Typical company car drivers went from breaking even to making a loss on fuel after the introduction of HMRC's latest Advisory Fuel Rates (AFRs) on 1 March, according to fuel management company TMC.
The firm assessed the impact of the latest AFRs, which were mostly reduced from the previous rates, by analysing detailed fuel card transaction data and audited mileage reports from a sample of 10,000 cars, predominantly new clients, on its mileage capture database.
The price of petrol and diesel implied by the HMRC rate was then calculated, and by crunching the numbers TMC found that most drivers would lose out.
Worst hit were drivers of small petrol cars. The latest AFR for under-1,400cc cars equates to them paying £1.08 a litre for petrol when the prevailing price was £1.19 per litre.
At the other end of the scale, drivers of petrol cars over-2,000cc - who on average made a profit of 2.4p per mile before 1 March - still receive nearly 1.5p per mile more than their actual average fuel cost.
TMC managing director Paul Hollick said: "We have all noticed a fall in pump prices recently, which is probably why HMRC have cut all but one of the bands by 1p per mile.
"Yet there is more to consider than just pump prices. The miles per gallon vehicles are achieving largely affects the cost per mile.
"As a result, many drivers aren't recuperating their full fuel costs, which is reflected in a poll of fleet managers taken last month, that found three-quarters of respondents don't think the new rates reflect the real cost of fuel."
Hollick said it would be fair for firms to ask employees unhappy with the latest rates whether they have calculated their actual mpg and fuel cost to see how it compares with the AFR.
He said: "Under the pre-March AFR, our data showed a 50-50 split between drivers who profited from the AFR and those who lost out, so on balance, the rates were 'right'. With the new lower rates, around 70% lose out.
"For many drivers, a lighter touch on the accelerator may improve their mpg enough to offset the cut in fuel expenses.
"If firms pay drivers a higher fuel mileage rate than AFR, it makes the driver liable for costly fuel benefit-in-kind tax unless the employer can prove to HMRC that the driver's actual fuel costs justify the rate paid."
According to TMC, an increasing number of companies reimburse drivers based on the actual cost of their fuel and thus won't be affected by AFR changes, though accurate data is required to do this.
Hollick said: "Actual-cost reimbursement automatically adjusts to real-world prices and mpgs. It eliminates the pitfalls surrounding flat rate fuel expenses.
"Moreover, it gives businesses excellent visibility over their business trip data, which they can use to drive cost savings.
"Our employee service team speak to drivers who use expensive fuel stations to highlight nearby cheaper alternatives.
"They also speak to drivers achieving low mpgs about their driving style and suggest ways they might improve their driving efficiency to minimise cost and emissions."