EMPLOYERS could be hit with millions of pounds in extra taxes unless they take action immediately to review provision of free fuel for private mileage, an industry expert has warned.

The Government is committed to a series of punishing annual tax rises for drivers receiving free fuel for private mileage. It is currently in the fourth year of a five-year programme of 20 per cent plus inflation increases on the taxable benefit of receiving free fuel for private mileage.

While this has sent tax bills for employees soaring, employers have also seen their Class 1A National Insurance Bills rocket.

Last year, the Inland Revenue warned employers they faced an increase in their NIC taxes of £15 million a year because of the tax changes.

Julie Stribling, head of fuel sales for ARVAL PHH, has warned fleets following the Chancellor of the Exchequer's pre-Budget Report that the clock is ticking for them to take action.

She said: 'The Government has said it will look at how to tax free fuel for private mileage from 2003. But regardless of this, the clock is ticking on tax rises that will be announced in next year's Budget. There is a concern that if employers leave it too late, they will be unable to process changes to their policy in time.'

The pressure is increased because even if a driver receives free fuel for one day of the new tax year, he or she is liable to pay the entire annual free fuel tax bill.

Arval PHH has also called for a specific new tax band for drivers using alternatively-fuelled vehicles, because they currently incur the same tax as petrol drivers, despite their fuel costing half as much and producing fewer pollutants.

Stribling added: 'If the Chancellor of the Exchequer could make a change to the fuel scale charge on free fuel for private mileage in the 2002 Budget, that would show there is a clear benefit for drivers in choosing alternative fuels.'