Managing your company cars: fuel

By Phil Williams, UK Fleet Sales Manager, euroShell Card - An extract from the Managing your Company Cars book edited by Colin Tourick and produced in association with Fleet News

Petrol and diesel prices are at an all-time high and continued volatility is predicted. What tactics can fleet decision-makers use to control their fuel bills?

Fleet operators must use every tool in their armoury to keep fuel costs under control and eliminate any unnecessary expenditure as pump prices continue their upwards rise.

At the time of writing, both petrol and diesel UK pump prices were at record levels – 128.60p a litre and 133.26p a litre respectively.

There is also unrest in the Middle East and a scheduled inflation plus 1p a litre fuel duty increase is due on 1 April 2011.

The Chancellor of the Exchequer is under pressure to axe the rise but the fact is that pump prices could be at least 5p a litre higher within weeks.

So why are fuel prices at the level they are?

The simple answer is to blame either the oil producers or the UK government for tax levels on petrol and diesel. But not surprisingly, the reality is that there is no simple answer.

It is suggested that as much as 80% of the rise in prices that we have witnessed can be attributed to growing demand, according to some economists.

This reflects a domestic investment boom in certain countries – the so-called BRIC countries and Brazil, India and China particularly – and, as such, is less damaging for economic growth than a rise solely attributed to falling supply.

But, while economic expansion in emerging countries is fuelling the world’s thirst for oil, prices are also being driven higher by supply uncertainties – such as that caused by unrest in the Middle East – that have recently forced the price of crude oil through the $100 a barrel mark.

In recent years other global issues that have impacted on the price of crude oil, which ultimately feeds through to the pumps, have included hurricanes and pipeline damage.

With numerous uncertainties impacting on the marketplace and global demand outstripping supply, particularly in relation to diesel, fuel prices will continue to be under pressure.

Recent years have seen booming new car diesel sales in the UK and across Europe.

In Britain, diesel car sales accounted for a record 46.1% share of the new car market in 2010, according to the Society of Motor Manufacturers and Traders, and on the continent the figure is even higher.

This has resulted in an imbalance between petrol and diesel fuel production.

Therefore, the world’s oil companies are investing in new sites and in their refineries to ensure more diesel fuel is produced to meet rapidly rising demand for diesel vehicles.

With so much concern amongst fleet managers and company car and van drivers about the current high price of fuel, it is impossible to write about the issue without explaining ‘where the money goes’.

Taking the average UK price of petrol at the time of writing (15 February 2011: 128.6p a litre) fuel duty accounts for 58.95p (45.8%), VAT accounts for 21.43p (16.6%), the wholesaler receives 39.3p (30.6%), the retailer’s margin is 7.42p (5.8%) and biofuel (paid for by the producer) accounts for 1.5p (1.2%). Tax – fuel duty and VAT – therefore accounts for 62.4% of the pump price.

Before tax, the cost of fuel in Britain is the lowest in Europe thanks in part to the reserves of North Sea oil.

However, add in government taxes, which collectively amount to 80.38p a litre, and it means that motorists face some of the highest pump prices in the world

So what can fleet decision-makers do to keep petrol and diesel budgets in check when, typically, fuel is the second-highest cost faced by transport departments after vehicle acquisition/depreciation.

Clearly, choosing vehicles with good mpg performance will deliver significant financial returns.

But, having introduced fuel-sipping models to the fleet, it is crucial that companies have a robust fuel management strategy to ensure that petrol and diesel bills are kept to a minimum otherwise potential savings will not materialise.

Unfortunately, anecdotal evidence suggests that some fleet decision-makers appear to believe that fuel is an unmanageable cost and that few cost-saving actions can be taken in the face of constantly rising prices.

But the opposite is true, with fuel cards and the management reports emanating from them enabling fleet bosses to take control over how company money is spent on fuel, gather accurate data about use, and then analyse that information to deliver savings.

As a result, even when forecourt prices are rising, the impact on fuel bills can be minimised.

And, while that means fleets should review vehicle choice lists to ensure that the most fuel-efficient vehicles that are fit-for-purpose are promoted to drivers, there are numerous actions that businesses can take to cut fuel use and typically save around £1,000 per vehicle a year, according to the Energy Saving Trust.

Fuel-efficient fleet management tactics to trim petrol and diesel use include:

• Journey planning
• Encouraging drivers to adopt a ‘smart’ or eco-friendly style of driving – drive smoothly, accelerate gently and brake sensibly
• The regular servicing of vehicles including monthly tyre checks – under-inflated tyres can raise fuel consumption by up to 10%
• Refining mileage reimbursement policies to discourage business trips.
• Removing unnecessary weight from vehicles – an unused roof box can increase fuel consumption by up to 10%

The majority of companies are already using car carbon dioxide (CO2) emission figures in deciding vehicle choice lists.

And this trend should have a positive influence on fuel consumption as, generally, the lower the CO2 figure, the better a car’s mpg.

But, while the CO2 tax benefits of choosing low emission company cars will remain in place for the duration of the vehicle operating cycle, promised fuel savings could be lost for a variety of reasons without vigilant management.

With some company car drivers using up to 20% more fuel than the most efficient employees, a fuel management action plan to cut costs is a fleet management essential.

That is why industry experts suggest that by taking note of the ‘fuel eternal triangle’ – miles driven, the volume of fuel purchased and the cost of fuel – all underpinned by a disciplined fuel card regime, financial savings of 15-20% can be achieved.

However, the best fuel control starts with asking the question “is the journey really necessary?

If it is, the employee should be driving an efficient vehicle and drive efficiently.

The next step is to consider how much the fuel is costing you. Though if you don’t know how many miles are being driven and how much you are paying for fuel, you will find it impossible to start managing this expense.

Smart or eco driving is the buzz phrase being promoted to fleet drivers with the twin aims of encouraging greener, safer motoring and cutting operating costs.

On the road, eco-driving encourages motorists to anticipate what is ahead of them, drive as smoothly as possible, and avoid harsh and aggressive acceleration and braking.

Saving energy saves fuel, cuts vehicle emissions, saves money and improves safety.

With fuel prices at record levels, the AA calculates that for a medium-sized car on a 100-mile motorway trip, eco driving can cut fuel consumption by almost a third – saving around a gallon of fuel.

Multiply that across a fleet of vehicles and the savings are huge.

Speeding also increases costs – driving at 85mph rather than 70mph uses 25% more fuel.

For some employees, specialist eco driver training maybe appropriate.
 

Off the road, eco-driving is about ‘greening’ your fleet through a range of simple initiatives.

For example, ensure tyre pressures are maintained and vehicles are serviced on schedule – poorly-maintained vehicles have higher emission and lower fuel consumption.

Additionally, it is important to identify opportunities to reduce mileage, use telematics to improve journey planning and record individual driver fuel consumption to encourage more fuel-efficient driving.

Fuel accounts for up to 30% of motoring costs, so smart driving makes commercial sense and coupled with effective fleet management, organisations can cut fuel bills significantly.

How can fleet managers reduce the carbon footprint of their company cars and vans?

Motor manufacturers are helping to drive down the cost of fuel by introducing new cars and vans with ever-lower carbon dioxide (CO2) emission figures.

As mentioned earlier, the lower a vehicle’s CO2 figure, the better its mpg, so without actually doing anything – other than choosing fuel-sipping, fit-for-purpose vehicles – fleet decision-makers are already on the road to being environmentally-friendly.

I have also mentioned some other environmentally-friendly actions that can be taken such as encouraging employees to drive ‘smarter’ and to plan their journeys before setting off.

There are essentially three separate component action areas when implementing measures to reduce a fleet’s fuel bill and therefore its carbon footprint:

• Measures that can be introduced and impact on the existing vehicle fleet and on employees who drive their own cars on business
• Initiatives to drive down mileage
• Steps that can be taken when renewing vehicles – typically replacing gas-guzzlers with fuel-sipping, lower emission cars and vans

Fleet experts recommend that the introduction of fuel cards is the simplest and most straightforward way to obtain the management information required to achieve step one and enable fuel use to be accurately measured and mileage reduction and employees’ ‘smart driving’ targets set.

Step two then focuses on cutting both business and private mileage, and typically involves the introduction of smarter working practices, journey planning, telematics/satellite navigation and, almost without exception, the ending of businesses providing a fully-expensed company car including paying for fuel used privately.

And the final strand comes with ensuring that company car and van choice lists are packed with the most fuel-efficient, low emission models.

I will focus on fuel cards later in this chapter and why businesses would be better off withdrawing the so-called ‘free’ fuel benefit.

But organisations cannot start to make any savings unless they know exactly where they are in terms of current spend.

Look to find fuel costs in a line of accounts at many businesses and you won’t due to weaknesses in corporate administration as well as many other disciplines.

But once you have uncovered that data you can take a big step forwards

To help fleet managers with the next step, Shell has introduced a unique and free online tool called Fleet Optimiser which will deliver an action plan to enable fleets to reduce petrol and diesel bills and their fleet carbon footprint.

By inputting information on the current profile of their fleet – petrol or diesel vehicles, CO2 emissions, fuel economy, mileage and the price paid for fuel – fleet chiefs will be able to see the total weight of CO2 emissions in a graphic format, how many trees would need to be planted to absorb the volume of emissions and the employer’s total fuel bill.

Then by making small changes to the profile of the fleet, switching to new higher-performance fuels (such as Shell FuelSave petrol and diesel), encouraging employees to adopt fuel-efficient driving techniques and improving mileage management, Fleet Optimiser will identify potential fuel and CO2 savings and deliver an action plan to help put the measures into practice.

In the current financial climate where cost management is the number one priority and every business is concerned about their carbon footprint, no fleet can afford to ignore such savings.

By making their fleet more efficient, businesses can save money and reduce the amount of CO2 in the environment.

Fleet Optimiser helps identify measures that could improve every company’s fuel costs and their environmental impact.

Using a combination of fuel cards and Fleet Optimiser is not only about utilising best practice management techniques; together they deliver real financial benefits to employers.

Fleet Optimiser can be accessed at www.euroshell.co.uk/fleetoptimiser

What fuel-related developments should fleet managers be aware of?

All of the major oil companies are involved in numerous research projects around the world – often in partnership with vehicle manufacturers – to deliver benefits to all drivers.

As well as looking for advances in current fuels – petrol and diesel – oil companies are partners in projects involving the future use of, for example, hydrogen and gas.

However, one significant breakthrough came when fuel companies started introducing fuel designed to deliver higher levels of mpg.

Shell’s products are called ‘FuelSave’, and FuelSave petrol and diesel were introduced to the UK market in 2010.

More miles at no extra cost is the pledge to fleets from Shell with the advent of FuelSave.

This petrol and diesel is Shell’s most advanced fuel economy formula ever, helping fleets and company car and van drivers save up to one litre of fuel per tank based on a minimum tank size and fill up of 50 litres (11 gallons) with a 2% improvement in mpg over standard main grade fuels. This saving has been verified by independent tests.

Unlike some other fuel companies, Shell offers this advanced fuel at no price premium over its previous main grade fuels.

FuelSave has been launched at a time when fleet operating costs are under the microscope.

FuelSave unleaded petrol is enriched with a Shell Efficiency Improver formulated to reduce energy losses in the engine by lubricating where the normal engine oils are less effective, such as the upper piston ring.

As energy losses are reduced, engine efficiency is increased, thereby providing fleets and drivers with improved fuel economy.

Meanwhile, Shell FuelSave Diesel is also enriched with a Shell Efficiency Improver, designed to ignite and burn more effectively than regular diesel, which helps lead to more effective combustion in the vehicle’s engine.

It also helps protect against the build up of deposits, which delivers engine efficiency improvements.

Using this fuel, a typical diesel company car driver travelling 20,000 miles a year can achieve a potential fuel saving of 39.7 litres (8.7 gallons) based on the average vehicle returning 45.8mpg, according to government data.

With UK average diesel pump prices at 133.26p a litre (£6.07 a gallon), it means an annual fuel budget saving of £52.81 per car.

Multiplied across a fleet of 100 diesel company cars and annual savings from filling up with FuelSave diesel amount to £5,280.90.
 

And if we look at petrol, the savings are also impressive.

For the typical petrol-engined company car travelling 12,000 miles a year, a potential fuel saving of 30.2 litres (6.67 gallons) gallons can be achieved based on the average vehicle returning 36mpg, according to government data.

With UK average unleaded petrol pump prices at 128.6p a litre (£5.85 a gallon) it means an annual fuel budget saving of £39.20 per car. Multiplied across a fleet of 100 petrol company cars and annual savings from filling up with FuelSave petrol amount to £3,919.50.

Meanwhile, Shell V-Power, which is designed to actively clean vehicle engines while on the move and is the company’s best performance fuel, continues to be available on forecourts.

By comparison Shell FuelSave, which Shell is billing as a ‘breakthrough’ in fuels, has been developed to improve fuel economy.

Drivers visiting fuel stations want to buy a product that can help them get the most out of every drop of fuel.

We called our new fuel Shell FuelSave unleaded petrol and diesel because it is our most advanced fuel economy formula ever, designed to improve fuel economy from the very first drop.

We want to make sure that each time drivers visit our forecourts they know that the fuel now going from the nozzle into the tank is formulated to help them save up to one litre per tank at no additional cost.

Please explain why fuel cards should be at the heart of every fleet’s fuel management strategy.

Gaining an accurate picture of driver behaviour is an essential pre-requisite to managing fuel expenditure – which typically accounts for around 25% of total fleet costs and is the second biggest budget item associated with business cars after depreciation.

Broadly, there are two areas where companies can take action to control fuel spend:

1. Ensure the most appropriate fuel is being used by a driver for their vehicle, and that it is being acquired as efficiently as possible.
2. Improve the efficiency of fuel being used by establishing a fuel policy and linking it to comprehensive monitoring to assess driver and vehicle performance.

Such an approach will result in both cost savings and environmental targets being achieved. But targets will only be achieved if a clear and integrated policy on fuel use is established.

For example, the policy may dictate that:

• Only certain forecourts/fuel outlets/brands can be used
• Performance-orientated fuels should not be used in ‘bread and butter’ fleet cars
• Each driver/vehicle should achieve a pre-determined mpg figure based on the manufacturer’s data relating to the specific vehicle

Additionally, individual fuel cards can have pre-set spending and usage limits.

This gives immediate control and removes the potential for fraud, while delivering single consolidated invoicing.

There is also a widespread industry view that employers who operate an expenses-based mileage reimbursement policy are encouraging employees to drive ‘unnecessary’ miles in pursuit of pocketing higher expenses.

Therefore by introducing fuel cards, organisations are automatically implementing a journey management strategy without specifically taking any action to limit travel.

But managers can only check if such policies are being adhered to and whether targets are on track to be met if they have the management report information available.

That means issuing fuel cards to all drivers – including staff who drive their own vehicles on business – and axing administratively cumbersome pay-and-reclaim mileage reimbursement systems.

Consolidated online fuel card management reports are typically issued monthly, and detail fuel purchases and usage.

These enable managers to study exact fuel use on a per driver/vehicle basis.

Poor consumption figures will identify costly driving habits that can be remedied through management action ranging from highlighting the problem with the employees concerned to a comprehensive driver training programme.

Similarly, an underperforming vehicle will highlight that action could be needed to remedy a specific mechanical fault.

It is difficult to estimate the savings that will accrue from the use of fuel cards.

However, experts have suggested that fuel bill savings of 5-20% are achievable by driving down mileage, and savings of 5-10% are achievable by replacing gas-guzzlers with fuel-sipping, low emission company cars and by implementing better management controls.

However, such fuel bill savings of perhaps 40% can only be achieved if businesses know what current fuel expenditure is.

Once a business gets a handle on current fuel use practices, major savings are undoubtedly possible by putting in place a series of measures and targets.

How should a fleet manager decide which fuel card is right for their fleet?

There are many types of fuel card available, ranging from single oil company-branded cards to multi-network cards and cards that can only be used in the UK and those that can be used at fuel stations across Europe.

Some cards can be used to buy a wide range of other goods and services, not just fuel.

It is very much a case of an organisation deciding what they require and then talking to fuel card providers to make sure it is achievable and pre-programming each fuel card accordingly.

Undoubtedly one of the major criteria for fuel card selection is network size. Shell, for example, will undertake a mapping exercise that will highlight where our forecourts are – and our euroShell card can also be used at Esso and Total stations.

In the UK that means drivers have access to around 3,000 forecourts – or around one-in-three of all service stations in the UK at the present time.

That means that the vast majority of drivers should be within easy reach of one of those forecourts without having to ‘waste’ fuel by travelling long distances.

However, there will be certain fleets and certain drivers whose geographical location may require them to have the use of an all networks card.

But, in our experience, forecourt choice is based on proximity and most drivers only ever use one site.

Once a business has decided on a particular fuel card it is crucial that drivers are educated as to where they can fill up their vehicle.

Price is clearly an important criterion and each provider will have an individual menu relating to the cost of fuel cards, what happens if a replacement card needs to be issued, as well as payment terms.

Access to management report information is also a key criteria and the depth of that reporting.

At Shell, for example, we have created the opportunity for fleet managers to personalise online fuel card activity reports.

This means that managers can obtain in-depth reports on individual vehicle consumption rates, and use a number of ‘smart settings’ to improve control over the type of fuel purchased, fuel price and forecourts used.

Additionally, ‘smart alerts’ help to prevent fraud by keeping tabs on refuelling patterns. And invoices are just a click away.

Just as with a credit or debit card, fuel card security is a key issue.

Each card has a unique PIN number and cards can be allocated to individual drivers and/or vehicles.

The majority of providers have a 24/7 helpline available to immediately stop the use of cards in the event of them being lost or stolen.

As with other fleet-related products, service level agreements should be implemented to ensure that the chosen provider delivers what customers require.

Similarly, most fuel card providers should appoint a specific account manager to handle individual clients.
 

How is the price of fuel determined when a fuel card is used?

There are two options available for paying for fuel once an employer has decided to introduce fuel cards.

The most straightforward is clearly pump price, which is generally suitable for the vast majority of businesses.

However, there is also the opportunity for businesses to pay for fuel on a fixed-price basis which is generally preferred by major fleet operators.

For example, at Shell we offer ‘list price’ buying, which sees a customer buying fuel at a fixed weekly price based on the previous week’s crude oil price on the Rotterdam market.

Which method is chosen is likely to be determined by the volume of fuel purchased.

As an example, most of our customers who choose ‘list pricing’ are buying millions of litres of fuel a year.

Generally speaking the greater the volume of fuel purchased the more advantageous it is to buy at ‘list price’.

One of the key benefits is that it ensures that wherever fuel is purchased across the country, the price is identical so it avoids the volatility of local area pricing and aids budget management.

Customers are informed of each week’s price by email.

What sort of reports can a fleet manager expect to see from the fuel card company?

Access to fuel card management reports online means that fleet decision-makers can drill down to examine every facet of fuel purchasing and usage to enable examination of expenditure in minute detail.

At Shell, our online reporting systems enable managers to personalise the reports. At the headline reporting level there are:

• Transaction reports detailing invoiced and un-invoiced transactions over a set period – invoices are typically two-weekly
• Fuel consumption reports on a per card/country/date/time basis
• Invoice summary reports – a summary of recent invoice amounts
• Summary reports – showing invoiced transactions at account, card group or card level, as well as summaries by product and country
• Email reports – highlighting vehicle consumption
• Exception reports – showing transactions that meet or exceed pre-selected criteria

Additionally, a system of ‘smart alerts’ enable managers to have at their fingertips a comprehensive overview of purchase types and values, dates, times, areas and vehicle numbers to identify refuelling patterns.

Meanwhile, as an increasing number of managers become software savvy, e-invoicing is also becoming an important prerequisite in determining fuel card providers. e-invoicing is fully compliant with tax regulations, is secure and can also be viewed online by up to three people in a company at the same time.

Once downloaded, the e-invoice can easily be attached to emails and distributed as an Adobe PDF.

In brief, fleet chiefs should ensure that the management reports they have access to are:

• Flexible and intuitive to use
• Provide simple online card management
• Can be instantly customised
• Provide ‘smarter’ control of the fleet
• Online invoicing is secure

Finally, signing up to online reporting such as Shell’s will also provide access to:

• The ordering of new cards
• The ability to block or replace stolen cards 24 hours a day
• Fuel price information
• Locating the nearest station online, print out the route or export the GPS codes to a vehicle’s satellite navigation device.

Can you suggest any other ways that fleet decision-makers can reduce costs and increase control over fleet expenditure?

Yes. Hundreds of thousands of employers are still paying for free private fuel for their employees, even when it makes no economic sense to do so.

And this is despite government moves to eliminate this ‘benefit’ because they believe it encourages employees to clock up unnecessary mileage at no personal cost.

While some employers may view the ‘benefit’ as a valuable perk, financial experts say it is very difficult to imagine any scenario where the ‘perk’ should remain in place from an employer’s perspective.

Since the late-1990s the government has gradually increased the scale charge paid by employees who receive ‘free’ fuel for private use from their employers.

In 2010/11, the car fuel benefit charge multiplier is £18,000, while the van charge is £550.

However, more than a decade on since the tax increases started to bite, data from HMRC shows that in 2007/8, 340,000 employees continued to pay tax on company paid-for fuel used privately, with the estimated figure dropping to 310,000 in 2008/9.

With HMRC figures showing that there were 1.12 million benefit-in-kind tax-paying company car drivers in 2007/8, this means that more than 25% of employees are in receipt of a fully-expensed company car.

In calculating the withdrawal of the benefit, tax experts suggest an analysis of every employee’s private mileage is undertaken.

The key considerations in making the calculations are a vehicle’s CO2 emissions and mpg, the number of private miles clocked up, the price of fuel and the tax status of the employee.

The breakeven point arises when the tax on the fuel benefit equals the anticipated cost of the fuel.

Companies should then decide on a benchmark cash sum that is a ‘reasonable average’ across the board to compensate those employees who will lose out with the ending of the ‘perk’ – any staff whose tax bill is lower than the cost of the fuel used privately.

The higher the price of fuel, the more advantageous the tax position of drivers, but the higher the cost for companies.

But, no matter what the benefit is for employees, businesses must pay for the fuel and it is a cost that could be saved, alongside National Insurance contributions paid on benefits-in-kind and VAT on the scale charges.

Added to the financial argument in favour of ending the ‘perk’ is the environmental argument.

With employers having no control over how many miles staff travel privately in a company car, the continuation of the benefit is damaging an organisation’s carbon footprint.

But, so that employers can continue to keep tabs on the amount of mileage employers travel in company cars, best practice suggests that business should buy all fuel via a fuel card.

Employers should then claw back from drivers the cost of fuel used privately so companies have a ‘complete picture’ of fuel usage and business and private mileage.

Rather than using fuel stations, some companies buy fuel in bulk and store it at their own facilities. Do you see this trend becoming more popular?

The bunkering of fuel is typically cost effective for large depot-based fleets, for example major parcel delivery companies.

Shell supplies a number of such companies with fuel.

Organisations buy the fuel – usually diesel – in bulk at a set price, which is lower than the pump price on forecourts. Most customers choose to have list prices fixed on a weekly basis.

However, while there is a financial advantage in terms of buying the fuel, it must be remembered that attached to the storage of fuel is a raft of legislation that must be met.

Companies that bunker fuel have an in-depth knowledge of the health and safety and environmental legislation surrounding the storage of petrol and diesel.

Additionally, robust monitoring systems must be put in place so businesses can identify the people that are accessing on-site fuel pumps and the vehicles that the fuel is being put into each vehicle, so as to prevent fraud.

In some cases bunkering can be complementary to fuel card use. For example, drivers of a depot-based fleet can fill their vehicles and then use a fuel card if additional petrol or diesel is required during the journey.

However, we continue to view the bunkering of fuels as viable for only a small number of organisations.

Fuel fraud has been highlighted to be a major issue facing businesses. Please explain how the use of fuel cards can curtail this problem and simultaneously aid mileage reporting to comply with tax rules.

Fuel cards are at their most effective if linked to an online mileage reporting system that enables employees to record business and private mileage.

Additionally, accurate and auditable mileage recording is essential if employee business and private mileage records are to meet HM Revenue and Customs’ (HMRC) rules, and mileage claims are to be under strict control.

Consequently, a failure by both employers and employees to keep business and private mileage records may prove an expensive tax and administrative mistake if HMRC launches an investigation into payments.

Whether employees are driving a company car or van or their own vehicle on business trips, the accurate recording of business and private mileage is essential to prove that staff are not in receipt of company-paid-for fuel used on personal trips.

Meanwhile, research from a number of organisations has revealed that fuel fraud is a major issue.

For fleet decision-makers, the telling statistic from one survey is that out of all expenses, business mileage is the most likely to be exaggerated, with 60% of claim-cheats embellishing the amount of fuel that they are using.

Meanwhile, recent data suggests that there is a 25% drop in mileage expense costs after they are properly audited.

This means that 25% of fuel claims by UK employees may be fraudulent – amounting to an estimated annual fraud cost of up to £1.6bn for fuel claims alone.

Add in the fact that without comprehensive monitoring of fuel use and related mileage, it is easy for staff to perhaps fill up another vehicle at their employer’s expense, and the opportunities for potential fraud are significant.

To help all businesses undertake mileage ‘due diligence’ and pinpoint any phantom fuel purchases made by employees, thus keeping fuel budgets in check and at-work drivers keep accurate journey records, euroShell fuel cards can be married up to Shell’s journey management system.

The technology enables the dividing of private and business mileage to meet HMRC benefit-in-kind tax reporting requirements.

Additionally, as highlighted previously, such a system simply enables employees to reimburse their employer for fuel bought using a company fuel card and then used privately.

Historically mileage capture has been achieved by drivers recording odometer readings on a paper-based log, but such systems rely on the integrity of employees for their accuracy, are open to widespread abuse and are administratively cumbersome for both employees and employers.

Shell’s online journey recording system requires drivers to input business journey details – date of trip, mileage, odometer reading on starting and finishing trip and reason for the journey.

For the monthly or quarterly period being recorded, business mileage is subtracted from the total period mileage, thereby identifying private mileage travelled.

A file containing accurate mileage data can then be transferred to the HR or payroll department to enable any expense claims to be processed while also meeting HMRC rules.

A failure to record comprehensive journey details may well result in employees paying additional benefit-in-kind tax and employers paying extra Class 1A National Insurance contributions.

Additionally, as employers and employees must demonstrate that HMRC compliance rules are met, it is vital to be able to provide an auditable record to the taxman.

It is therefore a far simpler administration task to encourage employees to record journey details as they occur on a day-by-day basis rather than to attempt to compile a record if HMRC launches a probe.

Daily online mileage management limits the exposure to an investigation by the taxman.

With regards to company cars, the tax authority guidance states that employers ‘need to keep details of any payments made to you by employees and directors for use of the car or fuel used on private journeys’.

Employers must be able to substantiate the end-of-year returns they make on P11D forms, and where a ‘nil return’ is declared, it is necessary to demonstrate that compliance rules have been met in practice as well as in theory.

A similarly efficient system is also essential in relation to light commercial vehicles.

Employees who drive a company-provided van on private trips and use employer-provided fuel will face benefit-in-kind tax bills unless use is deemed ‘insignificant’.

The tax rules state that employers ‘need to keep sufficient records’ to prove that there is no private use and recommend that mileage records be kept to show how vans are used.

Meanwhile, the tax rules advise employees to keep their own mileage records.

Additionally, tracking both business and private miles enables fleet operators to comply with the Euro6 VAT directive for reclaiming the tax and identifies future carbon footprint reduction and fuel-saving opportunities by clamping down on any journeys that may be deemed ‘unnecessary’.

The process of mileage monitoring can also aid best practice at-work driving safety compliance by enabling organisations to improve journey scheduling and put an end to a culture of long driving hours.

Looking to the future, how does Shell see the fuel card market developing?

Shell became the first major oil company to launch a forecourt location app (application) for mobile phones.

The Shell Station Locator mobile app enables motorists to find the exact location of more than 40,000 Shell stations across the UK and Europe.

The interactive map enables users to:

• Search for a Shell fuel station by town, city or postcode
• Pick up their current location via GPS
• Search by fuel type
• Save their favourite Shell stations for future reference
• View Shell station addresses and opening hours.

The current locator only features Shell’s retail sites, but the next update will include our commercial road transport heavy haulage refuelling sites.

We believe that the launch of this app marks the first stage in sophisticated mobile phone technology potentially replacing fuel cards as well as the multitude of credit cards that people carry.

Apple, for example, has already indicated that its next generation iPhone and iPad due for launch later this year are likely to feature NFC (Near Field Communication) chips similar to those found in contactless credit cards such as Oyster cards used on London’s transport network.

NFC is widely seen as one of the next big technologies for the smartphone world as makers look to bring more and more everyday functions into their handsets.

As a result, the technology would allow phones to act as payment devices for a multitude of goods, including fuel.

How do you see the fuel card market expanding?

Fuel management should be a major issue for all businesses because petrol and diesel is a substantial cost within the budget profile of every fleet.

However, the fact remains that thousands and thousands of small and medium-sized enterprises (SMEs) have yet to wake up to the benefits of fuel cards.

That is despite the fact that, depending on how poor fuel use monitoring and management are currently, the benefits and potential financial savings are enormous.

Within this chapter I have already outlined how issuing fuel cards to drivers/vehicles opens up a whole toolbox of levers that can be used by managers to identify areas where savings can be made.

Armed with information that fuel card management reports provide, organisations can start to manage fuel expenditure, challenge drivers and track mileage.

Add into the equation the additional added value features available that come with a fuel card – for example Fleet Optimiser and journey management from Shell – and the investment in fuel cards is quickly repaid.

It is amazing how many SMEs continue to rely on ‘pay and reclaim’ with drivers paying for fuel and then being reimbursed through their employers’ expenses systems.

There is no single solution to reducing fuel use – other than banning the use of vehicles. Instead you can save money by tactically introducing of a range of measures – including fuel cards – to meet your individual business requirements.

We therefore believe that an increasing number of employers – particularly SMEs – will turn to fuel cards to benefit from the wealth of data they deliver, enabling the improved monitoring of individual vehicle/driver fuel spend with the information revealed providing the basis for an action plan to cut costs.

Employers should also remember that the data gleaned from management reports means that fuel cards are equally as useful when issued to staff who drive their own vehicles on business as they are when issued to employees driving company-provided cars or vans.