Almost one-in-four fleets are now paying their drivers more than the Government’s advisory fuel rates (AFR), a Fleet News poll has found.

Companies are permitted to reimburse drivers for business fuel at above AFR if they can prove that the advisory rates are not high enough to fairly reimburse their drivers.

“The advisory rates will not be binding where an employer can demonstrate that the cost of business travel in company cars in the fleet concerned is higher than the guideline mileage rate,” confirmed HMRC.

Now, with fuel prices some 12% higher than when the latest AFR were set in December 2009, it appears more fleets are taking advantage of this position.

While the majority - 63% - of fleets that responded to the Fleet News poll still repay their drivers at the advisory rate, 22% are now reimbursing their drivers at a higher figure.
“We use a table based on the fuel consumption of each car – combined mpg less 15% - and the latest local fuel prices,” explained Dave Gill, finance director at JMC IT.

“We issue new rates when fuel moves more than about 5p per litre, so some cars get more than the AFR and some get less.”

But Gill says fleets that opt to move away from paying AFR must keep evidence of their vehicles’ fuel consumption and fuel prices to convince HMRC that their reimbursement policy is sensible and reasonable.

“We’ve just had a PAYE inspection and they were fine,” added Gill.
“HMRC are giving enough hints that it’s not an immovable line in the sand. In my experience, inspectors are reasonable people - talk to them.”

The disparity between AFRs and the actual cost of fuel has been steadily growing since the current rates became effective from December 1, 2009.

HMRC based its current AFR figures on a diesel rate of 109.9p per litre and petrol at 108.7ppl, but fuel is now more than 12% higher, exceeding 120ppl for the first time. 

The rates will not be reviewed again until June 1, and some company vehicle drivers are now reluctant to undertake business travel because they say they are effectively subsidising their employer.

The latest Fleet News poll is investigating how much fleets are paying their grey fleet drivers. Do you pay more or less than Government rates? Leave your vote here.

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