ACFO, the UK’s premier fleet decision-makers’ organisation, has called on HM Revenue and Customs (HMRC) to publish Advisory Fuel Rates for plug-in cars after providing it with real world mileage reimbursement figures.
The figures for 100% electric vehicles, range extended electric vehicles, and plug-in hybrid petrol and diesel models have been submitted to HMRC by ACFO after it hosted a fleet industry summit. It included representatives of the British Vehicle Rental and Leasing Association, contract hire and leasing companies, motor manufacturers producing plug-in vehicles and fleet managers operating zero emissions and plug-in hybrid cars.
Advisory Fuel Rates apply where employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel. Published quarterly, they provide a range of rates based on engine size and fuel type (petrol, diesel or LPG), and when used, are deemed to be tax-free.
For many years, ACFO has been calling on HMRC to publish official tax-free company car Advisory Fuel Rates for plug-in vehicles. It remains ACFO’s belief that the absence of defined mileage reimbursement rates is a handicap to some organisations including plug-in vehicles on their choice lists.
ACFO chairman John Pryor, who chaired the industry summit, said: “ACFO acknowledges that it is possible for businesses to calculate rates themselves and then obtain permission from HMRC to use them to reimburse drivers. However, it can be extremely time consuming and difficult to obtain all the relevant data to undertake those calculations. Far better for HMRC to publish official figures as it does for petrol, diesel and LPG cars.”
Sample data submitted to HMRC - full information for ACFO members is available on the organisation’s website at www.acfo.org - includes:
Additionally, ACFO has provided HMRC with information on how the summit delegates arrived at the pence per mile figures for plug-in cars.
The calculations follow a similar format to that used by HMRC to compile Advisory Fuel rates for petrol, diesel and LPG cars and include: mean battery capacity from manufacturers’ information, weighted by available models and average battery capacity (kWh); electric mileage range adjusted downwards by 15% to take account of real driving conditions and impact on manufacturers’ stated range; average battery recharge cost.
Advisory Fuel Rates for plug-in hybrid petrol and diesel models utilise the current Advisory Fuel Rates bandings based on engine capacity and are adjusted for electric mileage range: the greater the zero emission mileage range of a vehicle the lower the reimbursement rate.
Viewed as the ‘recognised voice of fleet’, ACFO says that it is vital that Advisory Fuel Rates are published, particularly as from April 2020 company car benefit-in-kind tax rates for ultra-low emission vehicles are to be linked to a car’s zero-emission mileage range.
Mr Pryor said: “That development adds complexity to the current company car benefit-in-kind tax system, but without an incentive linked to how an ultra-low emission vehicle is used on the road, it will not prevent drivers using the combustion engine alone in a plug-in hybrid car.
“Plug-in hybrid vehicles are at their most efficient when driven for as many miles as possible on electric power. Therefore, publishing lower Advisory Fuel Rates for plug-in cars will help to encourage drivers to use the car in the optimal environmentally-friendly way.
“The fleet industry is awash with stories of company car drivers choosing plug-in hybrid vehicles in pursuit of lower benefit-in-kind tax bills, but not reaping fuel economy savings. As a result, some contract hire and leasing companies have acknowledged they have had plug-in hybrids returned, with fleets incurring early termination charges, due to poorer than anticipated MPG returns. However, the reality is that those cars are not being used in the way they were intended.”
Mr Pryor concluded: “Advisory Fuel Rates for plug-in cars are essential. The rates we have provided to HMRC and the details as to how the figures were arrived at are as straightforward to apply as the current simple to use system for petrol, diesel and LPG cars (hybrid cars are treated as either petrol or diesel models).
“The figures we have calculated deliver a simple pence per mile mechanism that is both cost effective for employers so they are seeing a benefit from the more efficient technology, while employees are being fairly reimbursed for business mileage based on the capabilities of the plug-in vehicle technology.
“ACFO would urge HMRC to take the data and calculations the summit has provided and publish Advisory Fuel Rates for plug-in vehicles from the quarter beginning September 1, 2017.”
Supporting round table delegate comments
Alphabet is one of the UK’s largest contract hire and leasing companies and a major provider of plug-in vehicles to the corporate sector with more than 7,600 on its fleet. David Bushnell, product manager - mobility, Alphabet GB, who attended the summit, said: “The UK fleet industry and company car drivers have really got behind electric vehicles and plug-in hybrids over the past few years.
“In fact, adoption of electric vehicles and plug-in hybrids by companies and company car drivers has significantly eclipsed take-up of these alternative fuel vehicles by private buyers. With the recent Vehicle Excise Duty changes and the company car benefit-in-kind tax changes outlined until 2021 there has been some uncertainty but we’re hopeful that the trend towards electric vehicles can only increase significantly in both the corporate and private markets. But while we are making progress, it’s still a new technology with new challenges so there’s always more that can be done to increase take-up and mass adoption.
“One of the key issues that industry bodies, leasing organisations and corporate customers have consistently demanded a resolution for over recent years is the lack of an Advisory Fuel Rate for electricity - also known as an ‘e-rate’. It seems a complete anomaly that while HMRC publish Advisory Fuel Rate’s for petrol, diesel and LPG on a quarterly basis, the government is still lagging behind in publishing an Advisory Fuel Rate for a fuel which we are increasingly being told is a social, environmental and economic priority.
“Publishing an Advisory Fuel Rate for electricity would be a simple and effective way to overcome some of the remaining objections to electric vehicles in the corporate market and would incentivise plug-in hybrid electric vehicle drivers to do the right thing and ‘plug-in’.
“This has been an ongoing discussion topic for the fleet industry and HMRC for nearly five years, but now is exactly the right time to take action for the benefit of UK businesses and our air quality.”
Dale Eynon, head of Department of Environment, Food and Rural Affairs Group Fleet Services, which includes the Environment Agency, said: “Plug-in vehicles are an increasingly important part of the company car fleet and provide a more environmentally friendly alternative to standard petrol and diesel powered cars.
“As we all look to see how we can best meet the operational needs of our business, at the lowest cost to our budget and the environment, the need to seek alternative power trains such as plug-in hybrids becomes more important.
“Ensuring drivers are paid a mileage rate for business travel that is both transparent and fair, is vital to the successful deployments of such vehicles and the development of an agreed Advisory Fuel Rate will underpin this approach.”
Ian Featherstone, fleet advice manager, Energy Saving Trust, said: “Energy Saving Trust is delighted to have worked with ACFO in developing a methodology to calculate Advisory Fuel Rates for plug-in cars. The Energy Saving Trust has helped many organisations identify opportunities to use ultra-low emission vehicles (ULEVs), which a few years ago were often limited to pool cars and local delivery and service vans.
“More recently plug-in hybrid electric cars have gained popularity with company car drivers, significantly reducing their company car benefit-in-kind tax liability. Battery electric vehicles are yet to gain significant traction with this user group, but a greater choice of models with increased driving range are arriving on the market and will soon be on the radar of company car drivers and fleet operators.
“Advisory Fuel Rates are easy to use and ensure tax liabilities are not incurred and fleets need the same mechanism to fairly reimburse drivers for whichever ULEV technology is chosen.
“The Energy Saving Trust applauds ACFO for pulling together representatives from across the industry to agree this co-ordinated call for Advisory Fuel Rates for plug-in vehicles which we believe will help accelerate their mainstream use and ultimately the market penetration needed to meet our carbon and air quality ambitions”
A full list of the round table delegates:
John Pryor, chairman, ACFO
Caroline Sandall, deputy chairman, ACFO
Patrick Cusworth, senior policy advisor, British Vehicle Rental and Leasing Association
Dale Eynon, head of DEFRA (Department for Environment, Food and Rural Affairs) Group Fleet Services, which includes the Environment Agency
Ian Featherstone, fleet advice manager, Energy Saving Trust
Paul Hollick, managing director at mileage expense management company The Miles Consultancy
David Bushnell, product manager mobility at Alphabet, one of the UK’s largest contract hire and leasing companies and a major provider of plug-in vehicles to fleets
David Nicolas, consultant at Arval, one of the UK’s major vehicle leasing and fleet management specialists and a provider of plug-in vehicles to the corporate sector
Karl Anders, national electric vehicle manager, corporate sales, Nissan Motor GB
Mark Bell, cost of ownership manager, Toyota (GB)