Fleet News

Fuel payment a 'cost minefield'

EMPLOYERS could be walking into a costs minefield by making ill-informed decisions on the way their employees pay for fuel.

Fleet industry experts have voiced concern that a growing number of companies could be scrapping fuel cards.

This may be for a number of reasons, particularly because drivers are opting out of the benefit of receiving free fuel for private mileage, so the company no longer pays for all their petrol or diesel.

But fuel cards are still a vital fleet management tool that clearly identify fuel spending. They can also streamline the process of employees repaying the cost of their own fuel, if they have opted out of the free private fuel benefit.

Bank of Scotland Vehicle Management is also warning that drivers paying for business fuel with their own credit or payment cards could fall foul of proposed EU regulations on VAT reclaim, called the Sixth Directive.

Currently the Inland Revenue allows employers to reclaim the VAT element of fuel purchased for business use, even though it is not supported by a VAT receipt.

But the UK is out of step with the EU regulations which say VAT can only be reclaimed where fuel is billed directly to the company and it is supported by a VAT receipt.

Nigel Underdown, head of customer relationships at Bank of Scotland Vehicle Management, said: 'Companies need to be aware of what is brewing in the background before they move away from the fuel cards.

'If the legislation is enforced and the UK does have to come into line, it will leave those employers using mileage reimbursement at a serious disadvantage.'

The firm estimates that for a 100-car fleet, each averaging 14,000 business miles per annum, the loss could amount to £20,000. Fuel cards make sense whatever the situation, it adds.

Experts from Ernst & Young and Deloitte & Touche recently joined with fuel management company Arval PHH to warn other accountancy firms and fleet decision-makers not to automatically link free fuel with fuel cards.

Danny Clenaghan, managing director of fuel and business mobility at Arval PHH, concludes: 'Fuel cards are a fuel management system and not merely a way of paying for free fuel.

'If the Sixth VAT Directive from the EU becomes law in the UK, companies will have to use a corporate purchasing system to buy their fuel or else they will not be able to reclaim the VAT. Fuel cards are one way of avoiding that high-cost eventuality.'

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee