How should you pay for green fuels?

Going green is increasingly important for all businesses. But it’s important to understand the ramifications of electrification.

Are electric vehicles correct for your business? How do they fit the mileage profile of drivers?

Is there the correct infrastructure at work and at home to support electrification? And if there is, how do you reimburse staff for the electricity they use on business?

There are reimbursement rates for diesel cars. There are reimbursement rates for petrol cars. These are called the Advisory Fuel Rates (AFRs).

But what about staff that use electric vehicles or plug-in electric vehicles?

There is a slight problem.

You see, HMRC doesn’t recognise electricity as a fuel. Which is why there are no official reimbursement rates.

So what should you do?

For all business mileage you could reimburse them using actual cost; the difficulty there could be reconciling different electricity costs unless you used the national average of 14p and would have to be ratified with HMRC.

The alternative is to use a method suggested by TMC specialists in delivering control and cost savings across all their fleet and travel operations in an updated White Paper I was looking at recently called Electric Vehicle Fuel Rates – a TMC guide.

This is calculated by using a manufacturer’s published NEDC range figures and the battery’s kWh rating of the battery.

So a 30kWh battery Nissan Leaf, which has a range of 155 miles, gives us a mileage per kWh of 5.17.

Now, if you take the national average 14p per kWh cost and divide it into the 5.17 miles this produces a pence per mile figure of 2.7p. If you apply the same 15% reduction for real world conditions as used in the AFR calculation, then miles per kWh drops to 4.14 and provides a pence per mile of 3p.

Are you with me? Good.

But what about PHEVs – those plug-in hybrid electric vehicles?

These enable cars to drive in electric only mode for around 30 miles for zero emissions in urban areas. How should they be treated?

The HMRC advice is to treat all hybrids as either a petrol or diesel depending on the engine. While this is simple, it’s not necessarily fair or accurate.

Again TMC has come up with a solution – that you use the first 25 or 30 miles of the journey as electric using the EV reimbursement method and then any remaining mileage at the standard AFR rate.

TMC suggests a further ‘blended’ approach but I particularly favour the above method as it is a constant reminder to the company car driver to keep the battery charged.

All too often we’ve seen drivers take a PHEV for the tax advantages it confers without using the technology of the vehicle to deliver superior fuel consumption.

As you can see, going electric isn’t quite as simple as taking an electricity source and plugging it into a car.

But the results for fleets, in the right circumstance, can be substantial. As it will be for the environment as well.