Following intense discussions with fleet managers’ association ACFO over the past few months, HMRC has announced that it will give a one-month notice of the forthcoming changes, and that the rates will be reviewed twice a year, with changes coming on stream in January and July.
Furthermore, there will be a mechanism were rates can be changed should fuel prices fluctuate by 5% from the current rate.
This counters criticism from fleet managers that the previous system, which had a 10% trigger, was unwieldy and slow-acting and meant drivers were often out of pocket if fuel prices fluctuated wildly, as has increasingly been seen in recent years, and they were still paid rates that bore little relation to the price at the pump.
Also, under the previous system, there was no timetable for changes to the rates, they occurred with little notice and were posted on the HMRC website, meaning they could go unnoticed by many fleet managers and accounts departments.
ACFO director Stewart Whyte said: “We believe ACFO has played a very significant role in helping HMRC gauge fleet decision-maker views on the changes, as the new rules are closely aligned to our proposals.
“The increasingly volatility of fuel prices means that it is difficult for drivers, employers and company car drivers to find common ground over fair rates. Now that the HMRC tax-free rates will be reviewed more frequently, company car drivers will not be left financially out of pocket.
“Equally, the formal diarised review of rates is a vast improvement on the previous ad hoc arrangement.”
Elizabeth O’Donnell, policy adviser, said: “The overwhelming response to the proposals was positive and there was a general consensus that they were a welcome move which would clarify the existing framework and make it easier to implement future changes to the AFRs.
“HMRC is aware of the need to strike a balance between giving certainty for employers on the level of rates and reimbursing drivers for the cost of fuel.”
Changes to the way in which Advisory Fuel Rates, which are exempt from benefit-in-kind tax and National Insurance, are published will see:
Therefore, any rate changes will be posted on the HMRC website in early December or early June to allow employers implementation time