Fleet managers warned over free fuel perk

2 August 2001

COMPANY directors could be swamped with paperwork as drivers defect from company provided private fuel to escape rocketing tax bills.

Drivers who receive free fuel for private mileage have been hit with tax increases on the perk of at least 20% per year for the past four years as the Government tries to wipe it out.

But fleet managers risk losing control of fuel management unless they handle the shift of drivers into paying for their own private fuel, according to Godfrey Davis (Contract Hire).

The firm estimates a driver paying 22% tax needs to cover at least 6,000 private miles and a higher rate taxpayer 12,000 private miles to gain more in free fuel than they pay in tax. Companies also suffer from the rocketing tax bills, because the increases push up National Insurance contributions.

Nigel Underdown, director of marketing for the leasing firm, said: 'Although providing free fuel to drivers constitutes a cost to employers, the plus side of the equation is that it is very simple to administer. Employers have only to apply rudimentary control to identify areas of abuse.

'But as drivers increasingly discover the tax implications of this system and opt to pay for their own fuel, companies need to re-examine the whole process of fuel payment and reimbursement.'

Companies face two stark choices when moving away from free fuel for private mileage - either provide drivers with all their fuel and then bill them for private use, or make them provide all fuel and ask them to bill the company for business use.

Underdown added: 'Each method is simple in theory, but it means extra administration.'