TMC, the fuel management and business trip data company, has challenged the use of Advisory Fuel Rates (AFRs) for company car drivers and car allowance recipients, after HRMC reduced AFRs from 1 March 2019.
Paul Hollick, TMC’s Managing Director said: “We have all noticed a fall in pump prices recently which is probably why HMRC has 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. “
To assess the impact of the latest AFR rates, TMC analysed 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 new AFRs mean a typical company car driver went from break-even to making a loss on fuel costs after 1 March with drivers of small petrol cars are worst hit.
The new AFR for under-1400cc cars equates to them paying £1.08 per litre for petrol when the prevailing price was £1.19 per litre. At the other end of the scale, drivers of petrol cars over-2000cc, 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, which is baffling says TMC.
Hollick said: “When talking to drivers who are unhappy about the situation, it is fair to ask them whether they have calculated their actual mpg and fuel cost to see how it compares with the AFR.
“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.”
An increasing number of companies reimburse drivers based on the actual cost of their fuel and thus won’t be affected by AFR changes. Actual cost reimbursement requires accurate records to be kept detailing business mileage and fuel spend.
TMC helps businesses with actual cost reimbursement by capturing and auditing mileage claims and overlaying with fuel price and volume data from TMC’s own or third party fuel cards.
