Fuel rate increase will be wiped out

HMRC has increased the amount that every company vehicle driver can claim for business fuel.

However, as soon as the new rates came into force on December 1, fleet managers and their drivers raised concerns that the increases will be wiped out by the planned hike in VAT at the end of the year.

The Government sets Advisory Fuel Rates (AFR) every six months so companies know how much to repay their drivers for fuel.

In the latest review, every rate increased, with the largest increase for petrol-powered cars.

Drivers of company petrol vehicles with engines larger than two litres can now claim 20p per mile (up 2p).

Those with petrol cars between 1.4 and 2.0-litres now get 14ppm (up 2p), while those with petrol cars below 1.4-litres get 11ppm (up 1p).

Company drivers of diesel cars above 2.0 litres now get 14ppm (up 1p), while those with diesel-engined cars below 2.0 litres get 11ppm (also up 1p).

But concerns have been expressed that imminent return to a 17.5% rate of VAT will wipe out the increases in the ARF rates.

“By increasing the fuel rates and bringing the VAT back to 17.5%, I doubt if anyone will be better off and we'll be back to square one again,” said Leigh Stiff, fleet manager at Hannaford.

And with fleets also having to contend with the pump price volatility, Emmanuel Lewis, fleet manager at Vista Retail Support, added: “It won’t be long before the new rate starts to look low again.”

Alan Legge, fleet manager at BSI, personally believes that the HMRC should reduce the 5% ‘trigger’ rate to 2.5%.

“Based on current average prices we would need to see a 5.5p per litre increase before they will review the rates, which would mean our drivers losing on average a further £1.80p per tank,” said Legge.

Employers are not obliged to reimburse their employees for business fuel at these rates as long as they do not exceed them overall.

The new rates

The rates for petrol vehicles