ACFO has already been successful this year in influencing the Government’s policy on Advisory Fuel Rates - the business mileage reimbursement rates paid to company car drivers - following a recent meeting with HM Revenue & Custom’s (HMRC) officials.
The organisation now hopes that its new requests will be met with approval by Mr Osborne.
ACFO wants Mr Osborne to announce:
- Company car benefit-in-kind tax rates for at least 2013/14 and ideally 2014/15 as well. Rates are known for the next two financial years - 2011/12 and 2012/13 - but employees now deciding on their next company cars remain in the dark as to how much their tax bill will be from April 6, 2013.
- The removal of the outdated and inappropriate 3% company car benefit-in-kind tax surcharge that applies to all diesel cars
- Cancellation of the inflation rate + 1p a litre fuel duty rise scheduled for April 1, which could add around 5p to the cost of a litre of both petrol and diesel
- Vehicle Excise Duty for sub-3.5 tonne light commercial vehicles to be linked to their carbon dioxide (CO2) output in a similar structure to cars thus incentivising the uptake of low emission vans
- A full review of the Approved Mileage Allowance Payments (AMAPs) system.
Following ACFO’s recent meeting with HMRC it was announced that new Advisory Fuel Rates, which are non-statutory issue and therefore not a Budget matter, would come into effect three months ahead of schedule on March 1 as a result of the rise in fuel prices in recent months.
ACFO chairman Julie Jenner said: “We are assuming that HMRC will revise rates upwards to take account of the growing disparity between current published rates and real-life fuel costs. If that is the case then we are very pleased and the move underlines ACFO’s influence in the corridors of power.”
However, ACFO remains concerned that rates will only change following its representations despite there being a mechanism built into the system that should be triggered when forecourt fuel prices increase by more than 5% from when rates were previously set.
Julie said: “Fuel prices have increased further since our meeting and there is every likelihood they will rise again. We need assurances that in the future employees who use the Advisory Fuel Rates are not out of pocket and that rates increase when fuel prices rise.
“Additionally, the current rate structure is linked to vehicle engine size and fuel type and we believe there is a powerful case that the basis for bandings should now switch to CO2 emissions levels.”
Referring to AMAPs, the tax-free 40p/25p mileage reimbursement rate paid to employees who drive their own cars on business trips, Julie said: “Rates should be set at levels so that they genuinely reimburse drivers for the cost of running a car. We also believe they should be aligned to a vehicle’s CO2 emissions so they encourage the uptake of low emission vehicles.
“The AMAP system is a very blunt instrument with only ‘low administrative requirement’ as a redeeming feature. It is therefore time for a thorough review of the structure of the rates and how they relate to other systems in use to achieve business travel.”
Commenting on the historic 3% benefit-in-kind tax supplement applying to diesel company cars, Julie said: “This has been a feature of the current tax system since it was introduced in 2002. At the time diesel cars were nowhere near as environmentally efficient as they are today.
“As diesel cars have lower CO2 emissions than equivalent petrol engine models drivers should not be financially penalised for selecting them.”
In the last decade, successive Governments have announced company car tax benefit-in-kind rates on a three-year cycle so drivers knew where they stood for at least the majority of their use of the vehicle.
However, said Julie: “That routine has broken down. It is a concern that employees are taking delivery of new cars now and have no idea of how much tax they will be paying on a vehicle they will still be driving in 2013/14. Additionally, with some company cars now being driven into a fourth year it would be helpful if rates were announced on a four-year cycle.”
She added: “And, as linking car-related taxes to CO2 emissions has successfully driven down new car emission levels over successive years it makes clear logical sense to take similar action with regards to vans, starting with Vehicle Excise Duty.”
Finally, ACFO has joined the growing call from business representatives for the Government to axe the planned April 1 fuel duty rise.
“Amid continuing economic uncertainty, rising inflation and businesses struggling to contain costs it makes no sense to heap further financial pressure on companies through the tax system,” said Julie. “The planned rise should be axed.”