Fleet News

End of a perk spells trouble for fleets

ROCKETING increases in tax on free fuel for private mileage will spell the end of the perk for thousands of fleet drivers this year, causing a major headache for employers and fleet managers. In the March 1998 Budget, the Government signalled its intention to end, over five years, any benefit which nearly one million company car drivers gained from free fuel for private motoring.

The fixed fuel scale charges, used to calculate benefit-in-kind tax payable by drivers who enjoy free fuel for private use, began increasing by 20% year-on-year, wiping out any financial benefit. Now, with the latest Budget and tax increases approaching, drivers are set to demand alternatives to the traditional fleet perk. Keith Greenhead, PHH Vehicle Management's director of fuel, said: 'Many companies and drivers are deciding to withdraw from free fuel because of the growing costs on the company and the tax burden on the individuals.'

In a new Air Quality Strategy document published by the Department of the Environment, Transport and the Regions, fleets are given the clearest indication yet that they must rethink their approach to free fuel. The document says: 'Evidence suggests that free fuel for private use results in higher personal mileage and distorts decisions about transport operations, whereas alternative remuneration may be equally attractive.'

But at a Company Car 2000 conference in London organised by accountancy specialist Deloitte & Touche, David Rawlings, senior manager in the firm's automotive sector group, warned that some drivers were unaware their perk was set to become a burden. He said: 'The tax on free fuel is really now beginning to bite. But how many will carry on paying the charge, just because they are not aware of how much it is costing them? It is something that employers must focus on as these changes take effect.'

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