Drivers missing out on £135m

22 March 2007

UK company car drivers are collectively being left out of pocket by £135 million because of new advisory fuel rates, it is claimed.

The new rates were introduced this month but have come in for heavy criticism from the fleet industry for not reimbursing drivers sufficiently. They are used by firms to reimburse staff for the cost of fuel on 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 new rates are 1p or 2p lower than the previous ones and assume drivers are able to achieve better fuel consumption. But critics say drivers are rarely able to achieve manufacturers’ official combined fuel figures and that growing congestion also results in worse fuel economy.

Bank of Scotland Vehicle Finance challenged one driver to monitor their fuel consumption on a journey from Wolverhampton to Edinburgh. The vehicle used had a quoted combined fuel consumption of 46.3mpg but the average mpg achieved was 43.8mpg. This would leave the driver out of pocket by £1.32, the company claims.

Director of new business, Sean Bingham, said: ‘If this is a typical example, this will result in UK company car drivers not being reimbursed by more than £135 million per annum.’

The rates had already come under fire earlier this year by fleet operators’ association ACFO which questioned how the figures were reached and said in some cases they amounted to a near 20% cut.

A spokesman for Her Majesty’s Revenue and Customs said: ‘A weighted average mpg is calculated based on business car sales for the different advisory fuel rates, for example by fuel type and engine size.

‘The mpg rates are reduced by 10% to take account of real driving conditions and lower fuel economy for older cars. For LPG, the mpg is assumed to be 20% lower than for petrol as it provides less energy per gallon, hence fewer miles. The mpg figures are converted to fuel rates using the Department of Trade & Industry’s weekly petrol and diesel prices and the AA’s LPG prices.’

Fuel rates

New advisory fuel rates – old rates in brackets