Fuel’s a quid a litre – so why are YOU paying £3?

DESPITE lower pump prices, down to a quid a litre or less, the “zombie benefit” of fully-expense-paid private fuel is draining companies of cash at a rate of £2 to £3 a litre.

In fact UK firms could save between £240 million and £390 million a year by strategically withdrawing free fuel benefit. Obviously that’s mainly the big players but SMEs are just as likely to be following the ‘zombie’ trend.

Fuel and mileage specialist The Miles Consultancy (TMC) reckons that up to 90% of drivers getting private fuel benefit-in-kind should give up the highly-taxed perk or be bought out of it.

HMRC figures show that 220,000 UK employees – nearly one in four company car drivers – are hanging on to the free fuel benefit.

“Providing BIK fuel is often the same as paying £2 or £3 a litre” says Paul Hollick, commercial director of TMC. “It rarely makes financial sense for the driver and almost never for the company.”

TMC points out that the problem with BIK fuel for the employer is that it pays for the fuel in the first place, then the driver pays high BIK tax on it and then the company pays 13.2% Class 1A NICs on the driver’s tax.

One TMC client with 350 company cars is saving around £440,000 per year since it strategically withdrew the benefit from drivers via a TMC-managed programme. Now it only provides private fuel if the perk it works for both sides.

Said Mr Hollick: “Almost 80% of their drivers have already gone down either the opt-out or buy-out route. More than half the remainder are likely to join them. The average fully-expensed fuel cost in 2014-15 was £2,700 p.a. per driver. The cost to buy them out would be £750, giving a net average annual saving of £1,950 each.”