Lack of reimbursement rate ‘holds back’ EV uptake

Fleets have been warned that they could be missing out on major cost savings by waiting for HM Revenue and Customs (HMRC) to publish official fuel rates for electric vehicles.

There is currently no advisory fuel rate (AFR) equivalent for pure-electric vehicles because HMRC does not recognise electricity as a fuel.

A number of fleets have told Fleetnews.co.uk that this lack of clarity has prevented them from adopting plug-in vehicles.

Alex Castle, head of supply chain management at Telereal Trillium, said: “If you operate a wholelife cost model for selecting fleet vehicles and you use AFRs, without a published agreed AFR, it is impossible for a business to determine the wholelife cost of an EV model when compared against a traditional vehicle.”

Castle argued that it would be negligent to put both the business and the employee at risk of future retrospective tax burdens by arriving at an unapproved reclaim rate for recharging.

“With reclaim rates for AFR effectively allowing hybrid drivers to profit unfairly from their mileage – potentially incentivising mileage – for the drivers willing to take the leap of faith and select all-electric vehicles, having no clarity on what they can be reimbursed by their employer is crazy,” added Castle.

“It just seems the opportunities to support fleets moving in that direction are being missed.”

Jon Burdekin, head of consultancy services at Alphabet, told Fleet News that it is vitally important fleets understand the true position on reimbursing EVs.

“It’s not that HMRC won’t pay for EV recharging,” he explained. “It’s just that they don’t have a defined rate for it at the moment.”

Alphabet is advising fleets to be proactive and go to HMRC with a realistic suggestion for a pence per mile rate for the cost of electricity.

“We’ve helped customers work out the charging cost for their EVs, which is typically 2.5ppm to 3.5ppm,” said Burdekin.

“They’ve gone to HMRC with the calculations behind the proposal and been given the go-ahead.”

David Watts, fleet risk consultant at Zurich Insurance, agrees. He said: “The lack of an AFR from HMRC, while annoying, is an excuse and not a reason for companies to explore the benefits of EVs.

“AFRs are advisory and not compulsory – in the absence of a reimbursement rate, companies are more than capable of calculating and using their own rate as long as it’s sensible.”

Fleets will benefit far more from being proactive on this than if they’re reactive, said Burdekin.

“Once you have agreed a figure, whether it’s 2ppm, 3.5ppm or 4ppm, you remove a big perceived barrier between drivers and the substantial cost advantages on offer to both sides if they choose EVs,” he said.

EVs can also unlock major tax reliefs in Employee Car Ownership schemes. He added: “If you pay an EV driver, say, 20ppm under an ECO scheme – including a ‘fuel’ element of 2.5ppm – they can claim tax relief on the difference between that and the 45ppm rate allowed by AMAPs.

“I realise some managers genuinely perceive the AFR issue as a real barrier to adopting EVs, but if they looked closely they would see that it isn’t.

“But some people seem to use AFRs as a convenient, official-looking excuse for not looking seriously at plug-ins, despite the mounting evidence of their potential to cut
fleet costs.”

The Office for Low Emission Vehicles said that the Government recognises that this is a “developing area” and is keeping the tax rules under review to ensure that they remain effective in promoting the take-up of plug-in vehicles.

The concern around AFRs comes as Nissan GB managing director Jim Wright told Fleet News that the UK is “close to” a tipping point for EV sales after the company achieved a record level of Leaf registrations in September.

At 782, the registrations figure is the highest monthly performance of any market outside of America. It is also more than double the 300 Nissan registered in September 2013.