Fleet News

Fleet panel: Is free fuel a perk running on empty?

COMPANY car drivers may grumble about changes to company car tax, but their complaints would be better directed towards the vertiginous increase in tax on free fuel for private motoring.

Chancellor of the Exchequer Gordon Brown made his hostility to this 'perk' all too clear in March 1998, pledging to increase the fuel scale charge - the basis for calculating the tax due from the driver - by 20% above inflation, year-on-year for five consecutive years.

The result is that for the majority of drivers the apparently 'free' fuel is far from 'free'. In real terms, many drivers are paying more in tax than the value of the fuel they use.

Meanwhile, employers face the double whammy of the cost of the fuel and Class 1A National Insurance contributions on the fuel scale charge.

As a result, cold analysis shows this is a perk on its deathbed for all but a handful of employees.

Almost 24% of this week's Fleet Panel respondents said their organisations no longer provided the free fuel perk, and a further 34% believe their drivers will reject the perk this year - some employers have even introduced compensation to 'buy out' the perk.

However, this still leaves a surprisingly high proportion of company car drivers wanting to stick with the perk, cherishing its ease of budgeting, the hassle-free nature of completely funded motoring, the value of the benefit if they drive high private mileages (especially in thirsty cars), and perhaps not fully understanding the full extent of the tax hit they face.

  • 77 fleet decision-makers voted this week. To make your voice heard and your vote count, join the Fleet Panel. Simply email: jonathan.manning@emap.com ##Yes 54--left## ##No 46--right##

    ' Will your drivers (where eligible) opt to continue to receive free fuel for private mileage, given the 16% increase in fuel scale charge for the 2002/03 financial year?'

    'Depending upon their personal circumstances and the private miles travelled by them, this benefit will continue to be offered. There is no intention of 'buying out' this benefit currently.'
    K.R. Details supplied

    'No, as we encourage efficient and relatively economical vehicles I would anticipate the last couple of people will opt out of the private fuel scheme at April 5. Most people opted out on April 5, 2001.'
    Ian Smith, group accountant, CpiO

    'No. We have received a mixed reaction with about 30% deciding to opt out. Some drivers feel that the paperwork they will have to complete to opt out isn't worth the savings that they will make and others have not shown any interest at all.'
    Linda Bates, Konica Photo

    'Yes. We have given our drivers the option to not take it. It has been dependant primarily on where they live. If they live within a close radius to the office, then it is not worth their while. However, if they live a fair distance away then they are reaping the benefit.'
    G.O. Details supplied

    'Our drivers have an option to continue using the Allstar fuel card and take advantage of the Mileage Capture System that ARVAL PHH operates. I would say that 35% of my drivers opted out by April 1.'
    Diane Miller, fleet manager, Milgo Solutions

    'At present our company vehicles are fully expensed and our drivers do not have the choice to opt out.'
    M.D. Details supplied

    'Yes. It is the fear factor that they may lose out even though the figures disprove that theory. There is also the belief that the company is taking away a benefit which should be compensated.
    Mick Hayward, logistics manager, Anglian Windows

    'No. We have bought everyone out and shared the savings. We estimate that, on average, employees will be £400 net better off and the company saves a similar amount.'
    Dave Gill, fleet manager, JM Computing

    'No, not all of them. We are putting in place an alternative which mitigates their exposure, though how many of our staff will take it up is not known.'
    Chris Bates, facilities manager, Lafarge Aggregates
    'Yes. But there is evidence that drivers are doing their sums and realising that the net benefit is becoming increasingly marginal. One or two of our drivers have already handed back their fuel cards. Any further increase in taxation and the trickle will become a flood. At that point, the Government will end up with 100% of nothing. But then it is doing it 'for the environment' so it should not mind the loss of revenue, should it?'
    David Mullins, administration manager, Slough Estates 'We have written to all our drivers advising them of the new charges that they will have to bear for free fuel and have advised them to pay for their own personal mileage fuel with effect from 1st April 2002.'
    Barclay Wales, CS

    'We balloted all drivers in the group and out of 200 only two opted not to receive free fuel. A large number felt that although it may cost them slightly more in personal tax it wasn't worth the added administrative work to log all mileages and claim it back. However an equally large number said that they would review it next year.'
    David Bent, national fleet manager, Fowler Welch

    'We only have one person eligible for free fuel (our chairman). He will still benefit by receiving free fuel because of his high private use.'
    Tony Cock, finance director, British & Brazilian Produce

    'Several managers with high business mileage have already elected to pay for the fuel used for private travel. Those with perk cars and average private mileage are borderline and continue to take fuel although some are dithering, finding it difficult to burn their bridges by giving up this perceived benefit.'
    Glyn Davies, Staedtler

    'We have sent our drivers a working sheet so they can calculate how many private miles they need to be doing for this to be a benefit or not - I have not been inundated with requests to give up this perk though - only about 2% take-up at present.'
    Pat Marks, Hilton
    'No. Except for the few 'perk' drivers who have a high daily commuting mileage. We estimate the average break-even figure is 120 miles per week.'
    Paul Adey

    'The general impression is that the higher private mileage users will accept the additional tax burden, with the lower private mileage users probably opting to pay for their own fuel.'
    Peter Eldridge, fleet manager, Motorcare Holdings

    'We communicated to our drivers several weeks ago that they should each evaluate whether receiving the free fuel would continue to be a benefit in the new tax year, and to ensure they notified us by April 5 at the latest if they did not wish to continue to receive. I expect there will be a low number of fuel cards returned.
    Phil Redman, manager UK Fleet Management and Forms & Print Departments, IBM

    'Yes. We have decided for this tax year to stay with fully funded fuel. I am quite surprised, given other taxation issues, that the increase is as low as 16% and believe the Government has taken on board some of the issues regarding benefit-in-kind taxation. Whether the decision to stay with fully-funded fuel is the right one is open to debate but I have little doubt this will be the final year we offer it.'
    Mick Donovan, group fleet manager, Bower & Kirkland

    'We issue a matrix so drivers can compare private mileage costs versus tax benefit paid, so they can decide whether to continue with private fuel. If they do opt out there is no compensation as this is seen as a tax issue.'
    Barry Lingard, fleet manager, Leisure Link

    'No. We have very few drivers left in the scheme. However, this can still be a valuable perk if you drive 100 miles to work every day in a gas-guzzling 4x4. The fewer miles you do and the more efficient the engine, the worse off you are. Wasn't it supposed to be the other way round?'
    Steve Skelly, Rowley Ashworth

    'No. However, we will instead pay them an allowance through payroll, thereby eliminating the benefit-in-kind tax liability.'
    Stephen Pullen, Bently

    'Yes. A good fleet manager will have researched the current 'financial' position of drivers receiving free fuel and, where justified, negotiated on possible alternatives that benefit both company and drivers.'
    Bill Pinkney, Transport Consultancy Services

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