Fleet News

ACFO seeks urgent meeting with Revenue over new fuel rates

BUSINESS drivers are set to be out of pocket following changes in Advisory Fuel Rates (AFR) announced by HM Revenue & Customs and due to come into effect tomorrow.

ACFO has expressed concern over the latest AFR schedule and is seeking an urgent meeting with HMRC to discuss the new tariff and to seek clarification of how some of the figures have been derived.

The rates apply to claims from employees for reimbursement of costs of fuel for business journeys and also for clawing back private mileage costs from employees where all fuel is initially paid for by the employer (for example on a fuel card). The AFR system is intended to reduce administration by providing a set of advisory fuel reimbursement rates that are deemed tax-free.

ACFO’s concern is focussed on two major areas:

  • The underlying fuel consumption figures used by HMRC. As against the rates in effect since July 2006 - just seven months ago - the HMRC calculations assume an overall improvement of almost 2% in delivered fuel consumption performance - a change figure which ACFO claims is entirely unattainable across any view of the population-weighted target market. Fuel consumption of larger diesel-engined cars (over 2,000 ccs) are supposed by HMRC to have improved by some 2.4mpg or 7%.

  • Additionally, all rates on the schedule have been reduced by either 1p or 2p per mile, which in some cases amounts to a near 20% cut, although only petrol prices have changed (dropped) by more than the 10% trigger-level declared by HMRC themselves. The new figures show that HMRC calculate that diesel - now powering over 50% of the company car fleet - has fallen by only 8% since the last schedule.

    HMRC published the figures this week. An ACFO spokesman said: ‘Our members are already complaining that the new schedule will leave many company car drivers seriously out of pocket in terms of fuel for business mileage.

    ‘This is likely to cause concern - and significant HR and payroll administration - among employers who use the HMRC advisory rates. There is also a long-term concern by fleet managers that many individual tax offices ignore the ‘advisory’ nature of the schedule, and apply it rigidly irrespective of the flexibility which HMRC claims to be implicit in the structure of the arrangements.’

  • Advisory fuel rates from February 1, 2007.
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