Fleet News

AMAP rates: Government stands firm


As fuel prices soar, the question grey fleet drivers want answered is – why is the Government refusing to increase approved mileage allowance payments (AMAP) rates?

Millions of drivers rely on AMAPs to be reimbursed for using their own cars for business travel.

The rates are tax-free and take into account factors such as depreciation, repair and maintenance costs, insurance and vehicle excise duty, as well as the price of fuel.

Arguably, the current rates, set at 40 pence per mile for the first 10,000 business miles travelled and 25ppm thereafter, are not adequate.

“The cost of fuel is the pressing point, but the cost of motoring in general is going up,” Nick Sutton, chairman of Provecta, says.

“Higher interest rates are being pushed on to borrowers due to the credit crunch and greater vehicle depreciation is occurring as well.”

CAP shows that depreciation rates rose from 2.2% in May to 4.2% in June.

Nick Davies, director of reward and employment at accountancy firm Armstrong Watson, also feels AMAPs are insufficient.

They have not changed for the past six years.
“AMAP rates have been allowed to wither on the vine,” he says.

“It’s disgraceful that the rates haven’t been increased in line with reality.

"Drivers aren’t being reimbursed the full cost of business driving.”

Mr Davies points out that the rates are considerably lower than the AA’s guide.

For example, the AA shows that the total standing charges and running costs for a new petrol car which retails at between £13,000 and £20,000 is 63.03p – based on the driver doing 10,000 miles a year.

“Under AMAPs the driver is reimbursed £4,000 but using the AA figures they should receive £6,303,” Mr Davies explains.

And a similar picture is painted for diesel cars.

Unison, the country’s largest union, has been pushing for AMAPs to be increased.

“There is a lot of pressure on local government workers who have to use their cars for work,” says a Unison spokesman.

“They’re having to bridge the gap between the money they receive from their employers and the amount they spend at the pumps.

"If people have to use their own cars for work they shouldn’t have to pay for it.”

In light of the changes to the fuel-only mileage rates for company car drivers (advisory fuel rates or AFRs), speculation grew that AMAPs might be amended too.

But this proved unfounded.

“It’s extraordinary that the treasury recognises the increase in the cost of fuel by altering AFR rates but then refuses to increase AMAP rates,” Mr Sutton says.
So what’s the explanation for the Government’s reluctance to alter AMAPs?

Julie Jenner, chairman of fleet managers’ association ACFO, points out that it is much easier for AFRs to be altered as HM Revenue & Customs can change them every six months, whereas AMAPs are a statutory scheme and can be amended only by the Government as part of the Finance Bill and budget cycle.

This means the current rates won’t be increased until next year’s budget – if at all.

A Treasury spokesman says: “The rates were set to encourage the use of smaller, more environmentally-friendly cars and aim to reduce any incentive for employees to drive excessive mileage in larger and less efficient cars.

"The Government considers that these rates strike an appropriate balance between covering the running costs of all cars and delivering its environmental policy.”

So, behind the Government’s decision is an environmental argument.

Fleet consultant and author Colin Tourick explains: “There is a direct correlation between low-emission vehicles and lower motoring costs.

"Fixing AMAP rates at a time of rising fuel prices is consistent with the desire to get business drivers in lower-emission cars.”

But Mr Sutton disagrees with this strategy.

He said: “The problem is that lower-emission cars tend to be newer vehicles and they suffer a greater degree of depreciation. If AMAP rates are not sufficient then drivers won’t be compensated for depreciation.

"There’s no incentive for them to switch to lower CO2 cars.”

He also suggests that the Government faces several “dangers” by not increasing the rates.

“People could start skimping on the maintenance of their vehicle,” he says.

“Or they could refuse to use their vehicle for work.

This will have a negative impact on the economy.”

On the other hand, if the rates are increased it may encourage some drivers to take advantage of the system.

“The current system provides a covert incentive for drivers,” Ms Jenner says.

“Someone may drive 10,000 miles when they don’t need to in order to get the benefit.

"At the same time, the genuine drivers are out of pocket.

“ACFO wants a fair and consistent system and will continue to call for one.”

But one of the problems with changing the system is the lack of data on grey fleets.

The exact number of people who use AMAPs is unknown, although it is estimated at three to five million drivers.

So, if the Government has no plans to change AMAPs, how can employers help drivers who are feeling the pinch?

NHS Employers has set its own in-house mileage allowance rates.

But if employers reimburse drivers above the AMAP rate the payment becomes taxable.

“Companies that decide to set their own rates need to take into account the extra administration burden,” Ms Jenner advises.

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