Fleet News

Fuel tax delay 'will cost fleets millions'

THE UK fleet industry could lose millions of pounds because of a Government delay in announcing details of the fuel benefit charge for 2004/05, it has been claimed.

The charge is used to calculate the benefit-in-kind (BIK) tax payments for drivers who receive free fuel for private mileage from their employers.

The free fuel BIK system was first announced by Chancellor of the Exchequer Gordon Brown in the 2002 Budget and until then drivers paid tax on the benefit of free fuel based on the engine size of their cars.

Under the new system, the benefit of free fuel for private mileage was given a nominal value, which for the 2002/03 tax year is £14,400. The amount of tax drivers incur on this value is based on the carbon dioxide emissions of their company cars, using the same formula used to calculate company car tax.

The higher the emissions, the more tax is paid. The figure also affects the employer's National Insurance (NI) contributions when offering free private fuel.

Executives at fleet management company Arval PHH, operator of the AllStar fuel card, claim the fact that the Treasury has still not published the charge for 2004/05 has prevented many UK companies from planning accurately for the year ahead.

Danny Clenaghan, managing director of fuel and business motability at Arval PHH, said: 'Many companies are now planning their budgets for the coming year but in the absence of the new fuel benefit charge they are unable to determine their NI payments and the tax burden on their employees.

'Free private fuel has been a contentious issue of late, given the tax rises that have hit drivers over the past few years. Both companies and staff need accurate information to determine the continuing viability of this benefit. As it stands, they are forced to budget while using the wrong figures. This could cost them hundreds or even thousands of pounds.'

Clenaghan said it was vital that the Government publish the information now to avoid causing additional problems and confusion for companies.

He added that businesses needed to ensure they had a system in place to manage their fuel use whether or not they continued to offer free fuel.

A spokeswoman for the Inland Revenue said the fuel benefit charge for 2004/05 was likely to be announced in this year's pre-Budget statement, which could take place in either October or November.

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