Fleet News

HMRC rules out AFR rate rise

HMRC has ruled out any review of its advisory fuel rate (AFRs) before the scheduled June 1 review, despite soaring pump prices hitting a new record high, leaving company car drivers out of pocket.

In a move which clarifies the position over a ‘trigger’ point should fuel prices rise more than 5% above the level at which the AFR rates were calculated, HMRC said it would not be reviewing mid-term.

“It would mean two changes in quick succession, precisely the kind of thing that the AFRs are intended to avoid,” said a spokesman.

Fleets had been under the impression that the 5% trigger point would mean HMRC reassessing the rates mid-way through the six-monthly reviews, protecting them and their drivers against sudden fluctuations.

Current rates, which came into effect on December 1, 2009, are based on a diesel rate of 109.9p per litre and petrol at 108.7ppl.

However, prices have risen consistently since HMRC set the rates, which are used to refund fuel used on business trips.

Fuel was already 5% more expensive by mid-March and is now more than 12% higher, exceeding 120ppl for the first time.

James Spencer, managing director of Portland Fuel Price Protection, expects prices to continue rising.

“What seems bad value now will look good value in a few months,” he told Fleet News.

“And if the pound weakens further we could be looking at some frightening figures.”

ACFO has long campaigned for a system that is better able to react to fuel price volatility. It argues that a quarterly review of the rates or a review that is triggered if fuel rises by more than 5% is fairer.

“The fear I have with the existing system is that there is no mechanism in place to deal with significant fluctuations between the review dates,” said ACFO chairman Julie Jenner.

“We need a system where HMRC is forced to look at its figures if pump prices fluctuate significantly or for the review period to be shortened from six months to three.”

HMRC said its rates are not binding if an employer can demonstrate that the cost of business travel in its company vehicles is higher than the guideline mileage rates.

ACFO has responded further to the problem of AFR rates

It said in a statement this morning that some company car drivers are reluctant to undertake business travel because, with petrol prices so high, many are effectively subsidising their employer for every mile covered.

It said its office has been "inundated" with calls from members concerned at the increasing disparity between AFRs and the current forecourt prices.

ACFO director and membership secretary Stewart Whyte said: “It is clear from the number of ACFO fleet decision-maker members calling our office that there is widespread concern over the low level of AFRs in relation to the high price of fuel, particularly petrol as pump prices are now at levels not seen before in the UK.

“That concern is manifesting itself with some drivers reluctant to undertake business travel on the basis that they are effectively having to subsidise their employer for every mile covered, even driving economically.

“On behalf of the membership we have taken the issue up with HMRC.
However, despite the ‘significant pressure’ on drivers’ costs due to the high prices of petrol and diesel, we have been told that there are no plans to make an interim change at this stage.

“But, on behalf of ACFO members we will continue to press for a more responsive position on fuel reimbursement systems. We recognise the benefits of infrequent rate changes from the administrative point of view, but this has to be balanced against fairness and good practice for employee treatment.”

Current HMRC fuel rates
Engine size            Petrol     Diesel     LPG
1400cc or less        11p        11p        7p
1401cc to 2000cc    14p        11p        8p
Over 2000cc           20p        14         12

What it is costing your drivers
A company driver in a diesel-powered 1.9-litre car achieving an average of 45mpg and travelling 1,000 miles a month.

December 2009
Monthly fuel cost £110.78
Amount claimed under HMRC £110.80
Difference +£0.02 a month

April 2010
Monthly fuel cost £121.56
Amount claimed under HMRC £110.80
Difference -£10.76 a month

Find out if you could save on what your fleet is paying in petrol, visit the fleet news petrol prices page for more information.

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