Car fleet operators call for more frequent review of mileage rates

16 May 2008

The sharp increase in fuel costs has made fleet operators more aware than ever of the implications of the vehicles they run and how they run them, says ACFO.

Fuel prices at record levels are making fleet operators more conscious of the vehicles they choose and how they run them prompting an even greater corporate environmental focus, according to ACFO (Association of Car Fleet Operators) chairman Julie Jenner.

The environment is now at the forefront of fleet decision-makers’ agendas not only because by operating low-emission, fuel-efficient vehicles fleets can keep fuel bills and budgets in check, but because an increasing number of organisations are seeking to demonstrate and expand their corporate social responsibility (CSR) programmes by reducing their carbon footprint.

However, with experts predicting that fuel prices could reach £1.50 a litre within the next few months - latest data from the AA reveals average UK fuel prices are currently 112.2p a litre for unleaded petrol and 123.6p a litre for diesel - efficient and effective fleet management is more crucial than ever, says ACFO.

Speaking at ACFO’s annual AGM and Conference yesterday (Thursday, May 15) at Volkswagen UK’s National Learning Centre in Milton Keynes, Julie said: “ACFO needs to continue to evolve to meet the varying needs of its members and the changes to the UK economy - not least of which has been the very significant increases in fuel costs. If ever there was a time for ACFO members to share best practice in reducing fuel consumption, this is it.

“The sharp increase in fuel costs has made fleet operators more aware than ever of the implications of the vehicles they run and how they run them.”

One of ACFO’s major successes in recent years continues to be its championing of fleet causes within a wide cross-section of Government departments, including HM Revenue & Customs, HM Treasury and the Department for Transport.

On June 1, HM Revenue & Customs is expected to announce changes in the Advisory Fuel Rates. These 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.

Late last year HM Revenue & Customs introduced a mechanism for bi-annual reviews with a month’s notice of new rates being introduced on January 1 and July 1 each year.

ACFO played a pivotal role in bringing about the HMRC change, which was introduced this year, and expects the new rates to reflect the recent almost daily increase in pump prices.

However, following an unprecendented rise - around 8p per litre rise - in average UK unleaded petrol prices since January and a 15p per litre increase in diesel prices, ACFO is calling for HM Revenue & Customs to introduce quarterly reviews.

ACFO director Stewart Whyte, who has been involved in discussions with HM Revenue & Customs, said: “We want an effective and fair Advisory Fuel Rate system. We are living in extraordinary times and want to see a responsive system in place that does not leave company car drivers out of pocket.

“The increasingly volatility of fuel prices, and the consistent upwards trend, means that it is difficult for drivers, employers and company car drivers to find common ground over fair rates. More frequent reviews will take pressure off corporate HR and expenses departments which often find themselves under very heavy fire from drivers when fuel prices rise and the tax-free reimbursement rates don’t immediately fall into line.”

However ACFO also recognises the need to constrain administrative requirements so that internal costs do not escalate out of control, and the need to provide clear signals that employees should drive with an eye for good fuel economy.

Referring to tax-free Authorised Mileage Allowance Payments (AMAPs), Julie said: “We have not seen any material changes in this area following several rounds of consultation, but we fully expect further dialogue to take place, as it is our belief that this particular issue still has some ‘mileage’ in it.”

The AMAPs system considers any business mileage reimbursement to employees using their own cars for business at or less than 40p per mile (for up to the first 10,000 business miles per year; 25p per mile thereafter) as tax-free. These rates remain unchanged after six years since their introduction.

Finally, Julie told the AGM: “This year will be busier than ever. The demands of businesses are changing and the role of the fleet manager has to change in response, with significant shift towards business travel management. Therefore, it is important that members give us their feedback on areas of concern to them.

“We want to do everything we can to include members at all levels within the projects we undertake. We are expanding our membership into areas such as HR, finance and procurement because fleet responsibility is now residing within these departments in more and more companies. It remains vital that someone in the business retains control of the fleet activity, even where operational management is outsourced.

“So many conflicting issues and regulations now apply to running cars and vans. The publicity surrounding the introduction of the Corporate Manslaughter and Corporate Homicide Act shows clearly that top management cannot avoid ultimate responsibility. Ignorance is no excuse, and the penalties for getting it wrong can be significant.”