Drivers reluctant to travel due to record fuel prices
24 May 2010

Company car drivers are increasingly reluctant to undertake business travel because, with petrol prices at record levels, many are effectively subsidising their employer for every mile covered.

The warning comes from the Association of Car Fleet Operators (ACFO) which says it members are increasingly concerned at the growing disparity between the HM Revenue & Customs (HMRC) schedule of Advisory Fuel Rates (AFRs), which sets the levels at which company drivers can claim back business miles, and  current forecourt prices for petrol and diesel.

The current AFRs were revised last December when a litre of unleaded petrol cost 108.7p and a litre of diesel cost 109.9p. However, unleaded petrol has now rocketed to an all-time high of 120.3p a litre on average with a litre of diesel costing 121.1p, according to comparison website www.petrolprices.com Local prices may be considerably higher.

The current tax-free pence per mile rates which applied from December 2009 are:

1400cc or less - 11p (petrol); 11p (diesel); 7p (LPG)
1401cc to 2000cc - 14p (petrol); 11p (diesel); 8p (LPG)
Over 2000cc - 20p (petrol); 14p (diesel); 12p (LPG)

These rates apply where employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel. They provide a range of rates based on engine size and fuel type and when used, are deemed to be tax-free.

Currently, HMRC reviews rates twice a year with any changes taking effect on June 1 and December 1. But its own guidelines state that it will consider changing the rates if fuel prices fluctuate by 5% from the published rates.

However, despite a litre of petrol now  over  10% more expensive than when AFRs were reviewed last year and a litre of diesel being 10.2% more expensive - significantly above the 5% figure  -  ACFO  understands there no plans to change rates ahead of the scheduled half-year review.

That leaves drivers having to bear the cost of the increase in fuel prices but without the proper means of full compensation.

As fuel prices set to remain high, tight control of fuel costs, which can account for over 25% of all fleet costs, is essential. One option to measure the company’s fuel cost more accurately is through the use of corporate fuel cards.

Fleet Alliance offers a fuel card product in conjunction with leading network supplier, AllStar, which is accepted at 95% of major filling stations across the UK and can play a key role in measuring and controlling fuel costs.

There are a number of other major benefits. For example, due to its wide national coverage, Fleet Alliance Fuel reduces the amount of time drivers spend trying to find a particular branded fuel outlet, thus saving both time and fuel in finding a particular site. Drivers also have access to and can be directed to the cheapest fuel sites, typically supermarkets, but also some oil companies, through the card.

For fleet managers, consolidated invoicing eases the administrative burden associated with accounting for VAT.  The fuel card invoices are accepted by HMRC as VAT documents, removing the need for drivers to keep fuel receipts and the accounts department to process them.

The fuel card also allows key information to be fed back to the fleet manager via management reports which measure fuel spend by several parameters, including driver details, price, location and current mileage, and which can be integrated within existing fleet management systems.

This allows managers to identify areas where savings can be made, for example by using cheaper filling stations, such as supermarkets, or by highlighting the use of expensive products, such as super unleaded, by individual drivers or groups of drivers. 

The use of the fuel card also limits purchases that are expressly not allowed.  The driver cannot buy other goods with the card other than products specified on the card, typically fuel and oil.