Fleet News

Acfo urges change in mileage pay rate

THE Government is again being urged to announce major changes to mileage reimbursement rates in this month’s Budget.

Fleet industry voice Acfo believes the move, which forms part of its wish list for the March 22 Budget, will encourage opt-out drivers back into a traditional company car scheme.

Acfo wants the Government to review the Approved Mileage Allowance Payments system, which sets the structure and rates that can be paid tax-free to employees who drive their own cars on company business.

Director Stewart Whyte says that the current 40p per mile reimbursement for the first 10,000 miles and 25p a mile thereafter is over-generous for higher mileage cases, and actually works against HM Revenue & Customs’ general approach to discourage unnecessary mileage.

Acfo claim this ‘generosity’ has encouraged some employees to opt out of company car schemes.

Others are accused of taking the longer route to meetings in order to financially gain from the trip.

Acfo is calling on the Government to lower the 10,000-mile threshold to about 4,000 miles, the figure used up until 2002.

In the past, the organisation has also proposed a three-tier scheme: Payment of up to about £1 per mile for the first 500 business miles, about 40p from 501-4,000 business miles, and about 20p per mile thereafter.

Acfo director Stewart Whyte said: ‘In introducing a restructuring of AMAP rates a number of discreet types of drivers must be fairly accommodated.

‘These include employees who have never been in receipt of a company car and have always driven their own vehicle on company business and ex-company car drivers who have taken a cash alternative or moved to a personal contract purchase or employee car ownership scheme. The range of circumstances is enormous, and this is recognised as a challenge to devising a fair scheme.’

Critics of a change in AMAP rates claim a new system would not encourage drivers back into a traditional scheme but would instead make them worse off, as many do not have access to a company car.

Call for review of benefit-in-kind tax systems

FLEET managers’ association Acfo is also calling for a fundamental review of benefit-in-kind taxation on the private use of fuel paid for by employers.

It says the present arrangement of three different tax systems, depending on whether a car or a van is driven, and if the vehicle is operated under a traditional company car arrangement or by an alternative scheme, ‘disrupts good fleet management’.

The present arrangement for employees paying benefit-in-kind tax on fuel bought by their employer but used privately are:

  • Company car fuel benefit charge applies the same percentage figure as the company car charge against a set figure, currently £14,400.
  • If the vehicle is not a company car then drivers pay benefit-in-kind tax on the actual value of the fuel used for private motoring.
  • From April 6, 2007, van drivers face a £500 scale charge for employer-provided fuel for private use.

    In a call to Chancellor Gordon Brown, Acfo director Stewart Whyte said: ‘We have three different benefit-in-kind tax systems covering exactly the same issue.

    ‘There is no rationale around this and the tax costs faced by drivers are a major influence in many fleet decision-making processes, particularly in relation to whether businesses operate company cars or an employee-ownership alternative such as a PCP or ECO scheme.’

    Speculation is also rising that Chancellor Gordon Brown could introduce a new £200 top rate of vehicle excise duty to cover cars producing more than 250g/km of CO2.

    Chartered accountants and business advisers MacIntyre Hudson told The Times that the odds of Brown bringing in the new rate in the March 22 Budget were 2-1. The Chancellor is considering the plan, which was suggested by the RAC Foundation, in combination with tax cuts for less polluting cars.

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