Fleet News

Scrapping free perk won't affect fuel cards, says PHH

GOVERNMENT plans to tax out of existence the provision of free fuel for private motoring should not lead fleets to scrap fuel cards, according to PHH Vehicle Management. The fuel management giant was responding to Chancellor of the Exchequer Gordon Brown's Budget commitment to raise the benefit-in- kind tax for company car drivers in receipt of free fuel for private journeys by 20% over and above the rate of inflation.

This steep annual increase will raise the mileage break-even point where it makes financial sense for drivers to accept free fuel, rather than for their own private motoring bills. PHH claims that fleets could still save thousands of pounds on their annual fuel bill through the use of fuel cards, rather than adopt a pay-and reclaim system for reimbursing drivers for business mileage.

Keith Greenhead, PHH director of fuel, said: 'Some companies may suggest switching to business mileage reimbursement instead of using a fuel card, but companies currently using fuel cards need to guard against falling into this trap. A fuel card becomes even more essential for companies when they are only paying for business mileage fuel. Our experience has clearly shown that pay and reclaim or paying a flat rate per mile encourages drivers to exaggerate business mileage in order to subsidise their private fuel costs.'

PHH has teamed up with accountant Deloitte & Touche to quantify how fuel cards help save money and streamline administration - even if drivers are only getting their business fuel reimbursed. The 1999 Lex Vehicle Leasing Report on Company Motoring shows that 42% of fleets provide private fuel for all company car users.

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