Employers' rights to reclaim VAT on road fuel clarified

HM Revenue & Customs (HMRC) has today announced a change to the rules governing the recovery of VAT by employers on road fuel, following a European Court judgement in March 2005.

This new secondary legislation allows employers to recover the VAT on fuel purchased by their employees, which is explicitly for use in their business in the making of taxable supplies (as they could previously), as long as they hold a valid VAT invoice in support of the claims.

The Paymaster General, Dawn Primarolo said today: 'This is a good result for UK businesses; it is absolutely right that employers who have paid VAT on purchases of road fuel used for business purposes by their employees should be able to recover this, subject to the normal rules. We are pleased that this has been achieved through this new legislation and burdens on businesses have been kept to a minimum.'

Up to now, the recovery of VAT on fuel by businesses, purchased by employees from their own funds, was approved through existing UK legislation. However, the European Court found that this legislation was not compatible with the relevant provisions of the Sixth VAT Directive.

This was because the terms of the legislation did not ensure that the VAT recovered related solely to fuel used for the purpose of the employer's business in making taxable supplies, and did not require the employer to hold a VAT invoice.

Importantly, the Court did not agree with the European Commission that employers had no right to deduct VAT on the grounds that the goods were not supplied to them as taxable persons. This would have been a more serious threat to VAT recovery by UK businesses.

The new secondary legislation meets the terms of the Court's findings, and the only additional requirement, for businesses that do not already do so, is that VAT invoices must be retained in support of their claims.

Business Brief (22/05) is being issued with full details of the changes.

Revenue moves in to avert VAT disaster

OFFICIALS at HM Revenue & Customs have vowed to work with fleets to avoid swamping them in red tape during a major VAT overhaul – dashing hopes that the controversial changes will be scrapped.

There had been claims in the industry that fleets would be unaffected by a ruling which will impact on the pay-and-reclaim system of reimbursing employee mileage. Part of the European Sixth Directive states that VAT on fuel can only be reclaimed if the purchase is made by a VAT-registered company.

Therefore, if an individual purchases the fuel using a private card or cash, the employer cannot subsequently reclaim VAT.

Estimates have varied but a worst-case scenario put the cost to the fleet industry at £1.2 billion if they did not change the way staff paid for business fuel. The most likely course of action is to issue fuel cards to drivers.

The Government is currently considering its response to the European Court of Justice ruling that found the UK in breach of the European Sixth Directive. A recent meeting of the East Anglia region of the Association of Car Fleet Operators heard suggestions that they would be completely unaffected by the overhaul.

But officials at HM Revenue & Customs have stressed that the UK must follow the judgement of the ECJ, even though no decision has yet been made on how this will happen.

A spokesman for HM Revenue & Customs said: ‘The decision of the ECJ is final and the UK must now follow its judgement.

‘No immediate changes are envisaged. The UK will study the terms of the decision and consult with UK business on what changes need to be made to allow VAT recovery to continue.

‘Revenue & Customs are committed to minimising any additional burdens on business. In the meantime, UK firms can continue to rely on current UK policy.’

ACFO director Stewart Whyte said he has been led to believe by an HMRC source that a compromise between UK Government and Europe is likely.

Whyte said: ‘Happily, the last word I have had from the VAT people is that it looks like an accommodation may be possible between the UK and the EU.

‘There are no guarantees as yet but it seems possible that by an amendment to the UK regulations, our system just might become compliant with the Sixth Directive.’

He suggests companies do nothing at the moment but should ‘be prepared for a serious review if the accommodation cannot be reached’.

In March, Fleet News launched a new campaign after the ruling was announced. The Fleet News FuelWise campaign, in association with Arval, raises awareness and highlights best practice in dealing with the challenge of the ruling and gives advice on key issues.

Businesses in call for duty rethink

A BUSINESS pressure group is calling on the Government to link fuel duty with the price of crude oil.

The Forum of Private Business (FPB) makes its demand as analysts believe that oil prices are likely to sit close to the $60 mark for some time as demand shows little sign of abating.

FPB chief executive Nick Goulding said there is massive concern among small businesses about fuel prices. He said: ‘Many businesses are sweltering in a pressure cooker of rising fuel costs. To ease this intense heat a better method of setting fuel duty would be to link it to oil prices.

‘That way when crude is expensive, duty would be lowered and vice versa. This will mean there is a constant and consistent price at the pump and bosses would know exactly where they stand.

‘At the moment firms are being hit with a double whammy of high fuel duty and high oil costs.’

Goulding added that the Government is raking in huge sums of cash from the price of brent crude, both from its sale and increased forecourt prices.

He said: ‘While the Treasury is making vast sums of revenue from the price of oil it does not need to have a high level of duty too.’

The issue of fuel management is a hot topic. The Government is currently considering its response to a court decision that it must comply with the European Union Sixth Directive, which blocks companies reclaiming VAT on fuel payments they have reimbursed to staff if the fuel is not bought by a VAT-registered company.

In conjunction with fleet and fuel management company Arval, Fleet NewsNet has launched the FuelWise campaign, designed to help fleet decision-makers deal with the impending change.

Mis-fuelling damages will worsen

FLEETS should include mis-fuelling in their driver policies as part of a negligence clause as soon as possible, businesses have been told.

The problem of company motorists filling their vehicles with diesel instead of petrol or vice versa – which costs industry hundreds of thousands of pounds every year – is predicted to get worse.

Delegates at the Association of Car Fleet Operators’ (ACFO) East Anglia meeting were told by regional chairman Steve Hewett that he knew of two recent misfuelling cases, with only one of the companies able to claim the cost of repairing the damage from insurers.

He said: ‘I would advise companies to get a mis-fuelling clause written into their driver policies, or the problem will get worse.’

Hewett added that if employees are liable for the cost of repairs they can offset it against their own personal tax.

Earlier this month, fleets were advised by Lex Vehicle Leasing to fit clear instruction labels to car filler caps.

The company, which runs a fleet of 123,000 vehicles, is notified of about 20 mis-fuels a month by its customers (Fleet NewsNet, June 3).

Lloyds TSB autolease said its customers were spending tens of thousands of pounds a year on repairing cars filled with the wrong fuel (Fleet NewsNet, April 21).

The issue of fuel management is a hot topic. The Government is currently considering its response to a court decision that it must comply with the European Union Sixth Directive, which blocks companies reclaiming VAT on fuel payments they have reimbursed to staff if the fuel is not bought by a VAT-registered company.

In conjunction with fleet and fuel management company Arval, Fleet News has launched the FuelWise campaign, designed to help fleet decision-makers deal with the impending change.

Minute particles, maximum damage

PARTICLES smaller than blood cells in poor-quality fuel could be responsible for causing thousands of pounds damage to diesel engines.

Even the tiniest impurities in fuel could block minute holes in the injection nozzles of modern diesel engines.

The holes in the injectors can be as small as 0.001mm, meaning it is very easy for the holes to become clogged, engine experts warn.

Although misfuelling can cause the greatest damage to modern diesel engines, using low quality diesel can also cause problems.

Steve Smith, managing director of Feather Diesel Services, told members of the North East and Tyne Tees region of the Association of Car Fleet Operators: ‘Debris in fuel will clog such very small holes. That is why the correct fuels should be used and oil filters changed on a very regular basis. We carry out some changes at as little as 4,500 miles.

‘The filter is probably the cheapest thing that you fit to a car, but it is worth investing in high quality filters, because the tiniest impurities can damage the engine. Use a good-quality fuel, because you get what you pay for, and always use genuine parts.’

However, the problem with poor quality diesel is tiny compared to the rocketing problem of drivers mistakenly putting petrol in their diesel cars.

Smith said: ‘Modern diesels are so good that people can’t tell them from petrol engines.

“You must not move the car, but many drivers don’t know that in some cars, when you unlock the door, it activates the fuel pump to prepare the engine for starting.

‘This draws fuel through the whole system and causes damage without even starting the engine.’

ACFO regional secretary Vic Barnes said: ‘For fleets running large numbers of cars and vans this is certainly food for thought.’

The issue of fuel management is a prevalent one as the Government is considering its response to a court decision that it must comply with the European Union Sixth Directive, which blocks companies reclaiming VAT on fuel payments they have reimbursed to staff if the fuel is not bought by a VAT-registered company.

In conjunction with fleet and fuel management company Arval, Fleet News has launched the FuelWise campaign, designed to help fleet decision-makers deal with the impending change.

Card firms told to study finance house alliances

FUEL card providers have a massive potential to grow their business across Europe, a new report highlights.

The study, produced by business information company Datamonitor, suggests that even in markets where the use of fuel cards is common there is still potential for growth.

Datamonitor forecourts analyst Pandita Louram said: ‘While cash is less popular in Scandinavia and markets such as Germany, this form of payment is resilient in Southern Europe with one quarter of all commercial fuel volumes paid for in cash.

‘For fuel card providers these figures are encouraging because the benefits of a fuel card far outweigh those of paper payments.

‘Fuel card providers should target those remaining traditionalists in the commercial sector by emphasising that the fuel card is an easy-to-use, VAT-approved management tool that will ensure they are able to manage and control fuel spend in a more professional and cost-effective way.’

The report suggests fuel card providers could team up with credit card companies, which offer ‘versatility, competitive rates and value-added services’.

Louram added: ‘With well-established brands and competitive rates, credit card providers are in a position to offer the same as fuel card providers and much more.

‘In markets where the credit card industry is flourishing, fuel card providers are wise to investigate the possibility of forging alliances with those in the financial sector or else be at the mercy of motorists who place a high premium on convenience and competitive prices.’

The report comes as the UK Government is considering its response to a court decision that it must comply with the European Union Sixth Directive, which blocks companies reclaiming VAT on fuel payments reimbursed to staff if the fuel is not bought by a VAT-registered company.

In conjunction with fleet and fuel management company Arval, Fleet News has launched the FuelWise campaign, designed to help fleet decision-makers deal with the impending change.

Label ‘can save thousands’

A SIMPLE label costing a few pence could avoid drivers accidentally putting petrol in diesel cars and costing their companies up to £3,000.

The advice comes from Lex Vehicle Leasing, which runs a fleet of 123,000 vehicles and records 20 misfuelling incidents among its customers every month.

Lex believes modern common rail diesel engines are the biggest problem as the cost of replacing damaged parts, such as fuel pumps, injectors, rail, line filters and tanks can cost several thousand pounds.

The company says each misfuel directly hits the fleet department’s budget even if the car is on contract hire as the cause is driver error. It is now urging fleets to follow the lead of rental companies, which label the car’s fuel filler cap with the relevant fuel type.

In March this year Fleet News, in conjunction with fleet and fuel management company Arval, launched the FuelWise campaign to help fleet decision-makers deal with the impending change to the way firms deal with fuel. The European Sixth Directive states that VAT on fuel can only be reclaimed if the purchase is made by a VAT-registered company so, if an individual purchases the fuel using a private card or cash, the employer cannot reclaim VAT.

Estimates have varied, but in a worst-case scenario, the cost to the fleet industry could be £1.32 billion.

Free fleet fuel error over UK card usage

MANY fleets still wrongly believe that fuel cards can only be used by drivers who receive free fuel as part of their benefits package.

A fuel audit completed by fleet and fuel management company Arval in 2004 revealed that many companies associate a fuel card with free fuel – and bosses believe the situation has not changed this year.

As a result, if a company decides to remove the benefit of free fuel for private mileage for employees, the fuel cards are taken away as well.

But they could soon be needed again. Arval says that if, as expected, UK law is amended to fully comply with the European Sixth Directive, fuel cards would be one of the only purchasing tools available that allow companies to recoup VAT from business fuel costs.

In March, Fleet News, in conjunction with Arval, launched the FuelWise campaign, to help fleet decision-makers deal with the impending change to the way firms deal with fuel.

The European Sixth Directive states that VAT on fuel can only be reclaimed if the purchase was made by a VAT-registered company. Therefore, if an individual purchases the fuel using a private card or cash, then the employer cannot reclaim VAT. Estimates vary, but a worst case scenario puts the cost to the fleet industry at £1.2 billion.

Mike Waters, head of market analysis at Arval, said: ‘Fuel cards should have no impact on an employer’s decision to make private fuel part of an employee’s flexible benefits package.

‘Fuel cards are an easy-to-use, VAT-approved management tool that ensures companies are able to manage and control fuel spend. By using mileage logging techniques, employers can easily make the split between business and private mileage for all drivers using a fuel card.’

More than half of firms now use fuel cards

THE number of companies using fuel cards has doubled over the past year, a new report suggests.

A driver survey report produced by Bank of Scotland Vehicle Finance found that 56% of companies now offer drivers a fuel card.

The report adds: ‘This suggests some organisations have recognised the potential VAT cost associated with reimbursing business miles on a pence-by-pence basis, but the remaining 44% still follow the method of drivers paying and re-charging the company.’

The report found that 70% of drivers were unaware how many private miles they needed to cover to benefit from private fuel paid for them.

In March, Fleet NewsNet launched FuelWise campaign in association with Arval, to raise awareness and offer advice following a European Court of Justice ruling that will ban UK firms from claiming back VAT on company mileage expenses.

Mileage rule may lead to cutbacks

A PROPOSED ruling banning UK firms from claiming back VAT on company mileage expenses could lead to tighter control of other company expenses, it is warned.

The Forum of Private Business believes the European Court of Justice (ECJ) ruling could be extended in the future to areas such as hotel use, phone bills and taxis. In March, the ECJ declared the law allowing firms to claim back VAT on staff mileage expenses is illegal.

Forum of Private Business (FPB) chief executive Nick Goulding said he was concerned that the ruling would set a precedent for other similar legislation.

He added: ‘Small firms and the European economy need less red tape, not more.’

£4 gallon prompts fuel alert to fleets

THE average price of fuel has now surged past the £4-a-gallon mark for diesel, adding thousands of pounds to company fuel bills.

For a 100-vehicle fleet, each doing 10,000 business miles a year at 45mpg, the increase in prices since the beginning of last year has added more than £5,000 to annual fuel bills.

The increase demonstrates the importance of how fleets deal with fuel, as stated in the Fleet News FuelWise campaign, launched in association with fuel card supplier Arval. Fleets were urged last summer to introduce contingency plans as experts feared motorists were heading towards the £4 a gallon levy.

The average price of super unleaded is now £4.10 a gallon, diesel is £4.05 and four star £4.00.

Unleaded still remains under the £4 mark standing at £3.85 but as prices have surged by almost 10p a litre since the start of 2004 it is vital that fleets act immediately if they have not already done so.

Mike Waters, head of market analysis at Arval, said: ‘Fleets must have a really clear focus on managing their fuel spend. Sometimes, fuel spend comes second to service, maintenance and repair (SMR) costs but it now needs to be a key part of any fleet operating policy.’

Fleet managers need to ensure drivers are abiding by any fuel policies in place which includes using the most economical filling stations in the area.

Waters said: ‘The key point is to make sure drivers have access to a wide network of supply. There are differences in price between sites and fleets need to target drivers to use cheaper brands and suppliers.Fleets can also link fuel spend to the overall fleet policy.

Driver training, driving styles and driver attitude can all be linked to fuel and reducing fuel spend.’ The average price of diesel now stands at 89.2p per litre, unleaded at 84.7p, super unleaded 90.1p and four-star 88.1p.

EU shadow cast over UK fuel payments

FEW fleets know that much of the legislative changes that affect them now originate in Europe as Britain becomes more closely linked with the European Union. The latest piece of legislation shows how important it is to take notice of the changes that are being made.

Last week, fleets were warned of the full impact of a European row over fuel and VAT that has been ongoing for years.

Put simply, the European Sixth Directive wants to ensure that if companies are going to reclaim VAT on fuel purchases, that purchase was made by a VAT-registered company.

Therefore, if an individual purchases the fuel using a private card or cash, then the employer cannot reclaim VAT. Estimates vary, but a worst case scenario puts the cost to the fleet industry at £1.2 billion.

The ruling affects a wide variety of transactions, but one of the most wide-ranging is pay and reclaim, where a driver buys a tank of fuel and then claims back the cost, or simply claims back mileage at a set pence-per-mile rate. In both cases, this will be considered a private transaction and under the Directive, a company will not be able to reclaim VAT.

Arval, one of the UK’s largest leasing and fleet management companies, believes that the decision will have significant financial implications for UK businesses.

Typically, a company running a fleet of 100 vehicles, with drivers averaging around 15,000 miles per year, will reclaim in the region of £23,000 per year from HM Customs & Excise.

Mike Waters, head of market analysis at Arval, which is supporting the FuelWise campaign, said: ‘Companies will either have to overhaul their fuel procurement systems by introducing a purchasing mechanism that allows for billing to be made in the name of the employer or they will be unable to continue to reclaim the VAT on fuel.’

Why fleets should watch Europe closely

THE European Court of Justice decision threatens to brush aside years of UK practice in which drivers reclaim the cost of fuel they have purchase from their employers.

The current system of reclaiming VAT based on mileage allowances has been embodied in UK law since 1991, but it fails to comply with EU law because it does not ensure that the fuel is supplied to the company and not the driver.

Normally, the company does not hold a VAT invoice made out in its name, but the long-standing agreement meant that so long as firms showed they had a robust system for checking mileage and a fair mileage rate, then a reclaim could be made.

The European Commission first announced its intention to challenge the validity of the UK law back in 1998, according to Robert Crooks, VAT Partner at Ernst & Young.

Customs & Excise said the UK would resist any challenge, but said if the worst happened, it would not allow any change to be retrospective. The UK Government refused to accept the Commission’s challenge, but a similar case brought against the Netherlands was successful in November 2001.

The Commission commenced formal infringement proceedings against the UK at the start of 2003. By the end of 2004, the Advocate General issued an opinion strongly in favour of the Commission’s challenge.

These were clear warning signs that the Court was likely to rule against the UK on this issue.

Crooks said: ‘Those fears have been realised in the judgment. It seems a distinct possibility that businesses who have hitherto reclaimed VAT based on mileage allowances will be forced either to revise the way that business mileage claims are handled or to stop claiming VAT on mileage rate payments altogether.’

Your questions answered

1. What is the Sixth Directive?

Put simply, the European Sixth Directive wants to ensure that if companies are going to reclaim VAT on fuel purchases, that purchase was made by a VAT-registered company.
Therefore, if an individual purchased the fuel, using a private card or cash, then the employer can not reclaim VAT.

2.Why does it affect my fleet?

If you use pay and reclaim – reimbursing employees on a pence-per-mile basis for mileage – then that is affected and your company will not in future be able to reclaim VAT on the cost.

3.Why the sudden change?

It isn’t sudden. This has been an issue since 1998, but in the slow-moving world of European politics, it has taken until today to sort out. There have been announcements over the past few years, many reported in Fleet News, that have flagged up the issue.

4.So what do I need to do now?

Just prepare and speak to the experts. The UK isn’t going to change immediately just because the ECJ tells it to. It will spend time considering its position and before it makes any alterations to legislation, it is likely to consult with the industry. Government sources suggest it will be months before anything happens.

5.I use fuel cards, am I affected?

Where a fuel card held in the name of the company is issued to employees, this should meet the ECJ’s requirements where it used to purchase fuel for business use (or where charges are made to employees for any fuel used privately, or where the Fuel Scale Charge is to be accounted for).

6.Do I have to use fuel cards, or is there another way?

According to Ernst & Young, for retail supplies, a ‘less detailed VAT invoice’ can be produced and this is acceptable evidence to support VAT recovery.
A less detailed VAT invoice contains the name, address and VAT registration number of the retailer, the date, a description of the goods or services, the total payable and the applicable VAT rates. An important question will be whether this type of invoice – which is not made out in the name the employer – can be used to support claims for recovery of VAT on fuel costs, provided that the claim is for VAT on business mileage only.

7.Where do I go for advice?

Well, you have started in the right place. The Fleet News FuelWise campaign, in association with Arval, aims to keep the industry informed over the next few months.
You can also approach industry experts, such as Arval, for advice. For the official view log-on to europa.eu.int, the ‘gateway to the European Union’, but it is very difficult to navigate, just like the real thing.

Fuel cards v corporate credit cards: the great debate

IF UK domestic law is amended following the recent ruling on the Sixth VAT Directive, fleets will be unable to recoup the VAT on business fuel without adopting a fuel purchasing system, based on a fuel card or corporate credit card.

Mike Waters, head of market analysis at Arval, says fleets need to understand how both types of card could work for them. One of the main advantages of a fuel card over a corporate credit card is that the former provides fleet managers with accurate fuel management data. To start to reduce the overall fuel bill and enforce a fuel policy among drivers, fleet operators need to obtain data on spend.

UK pump prices remain high, reflecting the volatile global market for crude oil. Waters reckons there has never been a greater need for companies to keep tight control on fuel expenditure.

All fleet decision-makers need to understand the financial benefits of effective fuel management, and the tools which can be employed to mitigate against ever increasing fuel bills.

Waters said: ‘By using a fuel card, fleet operators can gain information on pence-per-litre and miles-per-gallon on all fleet vehicles and drivers.

‘This procedure is not possible with a corporate credit card, which can only give details about location, price and time of fuel purchased.

‘Critically, before fleet managers can start to reduce their overall fuel bills, this cost element needs to be separated from other expense types and made visible before the fuel bill can be tackled.

‘This is not easily achievable with a corporate credit card. Detailed fuel costs are not readily transparent from hotel bills, travel costs and corporate entertainment, making it very difficult to extract meaningful fuel data on each driver.’

However, Waters conceded that a credit card offers a degree of flexibility.

The problem, he added, was that this comes at the expense of control and control is a key element of implementing and enforcing an effective fuel management policy.

He continued: ‘A fuel card can only be used to buy petrol, diesel, LPG or lubricants in a closed network of forecourts.

‘However, credit cards provide the card user with the opportunity to spend anywhere and drivers can purchase additional items which could be swallowed up within the fuel budget. A corporate credit card can be used in any petrol forecourt, whereas a fuel card is confined to a network of forecourts.’

Fleet operators should always look closely at fuel card providers’ networks and establish if a specific card will provide sufficient coverage for all drivers, Waters claimed.

He said: ‘Arval’s AllStar card is accepted at 95% of forecourts across the UK.

‘There is little point in looking to control fuel spend if drivers expend more in fuel looking for a particular brand than they save through a fuel policy.’

Accurate fuel card reporting requires the co-operation of all fleet drivers, who have a responsibility to provide accurate mileage information and their vehicle registration at the point-of-sale.

Fleet operators should stress that the vehicle and fuel is a company resource used for business travel, and in many cases for private travel (for which drivers are accountable) and should be respected as such.

Waters reckons one of the key benefits of using a fuel card over a corporate credit card is the number of report types available, which can be regularly produced from fuel card data.

Typically, these could include target pricing reports to mitigate against rising pump costs, MPG improvement statistics to highlight good or poor fuel economy performance among drivers and vehicles, suspect transaction reporting to identify abuse and suspicious card behaviour.

He added: ‘Other options available include vehicle transaction reports that can provide full details on pence-per-mile, operating costs and total miles travelled.

‘To ensure that drivers are providing their mileages at the point-of-sale, zero mileage reports can also be used to pin-point drivers who do not adhere to company fuel policy.’

For the busy fleet operator, data is available in a range of report formats. Arval’s online Interactive system, for example, allows clients to access their accounts and run and customise their own reports whenever required.

Arval claims administration is dramatically reduced because fuel card management systems can produce a single, consolidated, cost-centred invoice for an entire fleet that doubles as a VAT receipt for every purchase.

Waters said: ‘A further benefit of a fuel card is the ability to monitor how much drivers pay for fuel by implementing target pricing initiatives.

‘By using this method, fleet managers, in conjunction with the information provided by their fuel card supplier, can set a designated price-per-litre target which all drivers should look to meet when they fill up.

‘This could be set for a regional average price at the pump with a parameter set for two pence over that price.

‘The fuel card will capture data on all drivers who do not meet this target and an exception report can be compiled.’

Arval reckons that fuel cards remain the only VAT-approved fuel procurement system that can capture detailed fuel data on all drivers across a fleet of any size.

Waters added: ‘In an age of high prices at the pump, fleet operators need fuel procurement systems that not only ensure they are able to reclaim VAT where it is due but will provide a vital tool that will help to manage fuel bills in a pro-active way.’

Whitechapel reassures fleets – ECO schemes should be safe

THE European Court of Justice ruling on VAT fuel reimbursement payments will not impact significantly on car ownership schemes, despite the widespread industry concern that the proposed ECJ changes will cost British fleets £1.2billion, Adam Trevaskus, head of Whitechapel has claimed.

Trevaskus is adamant that the proposed VAT changes will not have any major financial impact on car ownership schemes, as they are not dependent on VAT reimbursements on fuel charges to generate financial savings or gain for the business or fleet driver.

He said: ‘Rather than generating savings through fuel expenses, car ownership mitigates benefit-in-kind (BIK) taxation and uses the Inland Revenue’s Approved Mileage Allowance Payment (AMAP) system to provide long-term financial savings for businesses and drivers.

‘Therefore, the proposed changes will not have a financial impact on companies operating structured schemes – those developed in line with business objectives and fleet profile and supported with the necessary financial, accountancy, PAYE and HR infrastructure.’

Although the VAT changes will not financially compromise car ownership schemes, Trevaskus warned fleet operators against making any rash decisions and opting for quick-fire solutions or switching fleet policies.

He added: ‘Similar to most fleet policies, the financial success of car ownership is dependent on collating accurate driver mileage. However, for those schemes that are reliant on VAT fuel reimbursements, the collation of driver mileage will become even more difficult as businesses will have to pay in advance for fuel to be able claim back VAT.’

Trevaskus claimed that as a result, there would be far less onus on drivers to log their mileage as fuel costs will not be coming directly out of their expenses, placing an even greater responsibility on companies to record driver mileage.

He said: ‘The proposed VAT changes have prompted talk of corporate credit cards, fuel cards, fuel agreements with fuel suppliers and switching fleet policies as potential methods of reducing the reimbursement losses.

‘Although these are all feasible and practical options and companies are right to consider what steps they can take to prepare for the proposed changes, they should not lose sight of why the ECJ considers the changes necessary.

‘Ultimately, it is the loose recording of driver mileage that has brought the VAT mileage reclaim system under scrutiny and fleet operators should remain focused on the accurate recording of driver mileage.’

Rising fuel costs lead to an increase in fraud

RAPIDLY rising fuel prices appear to be leading to an increase in fuel fraud by drivers.

Research has shown that the threat of the £1 for a litre of diesel or unleaded is tempting more drivers to try to hide private fuel costs in company fuel bills.

An increasing number of fleets are raising concerns that their costs are going up because of fuel fraud and they are looking for solutions to combat the problem.

The warning, from fleet technology experts cfc solutions, came as the AA revealed that prices at garages and supermarkets are steadily rising, with unleaded up 1.5p a litre (6.8p a gallon) and diesel up by 1.7p a litre (7.7p a gallon).

This rise is part of an ongoing increase which has been caused by a crude oil price increase of 38% since January.

Cfc solutions sales and marketing director Andy Leech said: ‘We have had an increasing number of fleets coming to us over the last couple of weeks citing an increasing amount of fuel fraud.

The fleets which are hardest hit by this trend are almost all operating a pay-and-reclaim system, which makes the tracking of fuel fraud very difficult.

Leech explained: ‘When fleets come to us and ask us how to tackle fuel fraud, our first piece of advice is to tell them to abandon receipt-and-reclaim and switch to fuel cards. It immediately makes committing fraud much more difficult.’

Leech added that the most common pay and reclaim abuses seen involved drivers filling up their wife, husband or partner’s car at company expense or adding items such as newspapers and sweets – and even barbecue charcoal – to fuel claims.

He explained: ‘If you are using receipt-and-reclaim, you can be pretty sure that somebody in your company is stealing fuel – and that as pump prices rise, more of your drivers will be tempted.’

Thousands of fleets are currently examining their fuel provision after a court case stated that fleets using pay and reclaim would not be able to reclaim VAT on the cost of fuel if the purchase was made by an individual, rather than a VAT registered company.