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Company car drivers left out of pocket by AFR changes, says TMC

Company car drivers left out of pocket by AFR changes, says TMC

The vast majority of company car drivers are making a loss on fuel costs after advisory fuel rates were reduced last month, TMC has found.

From March 1, HMRC cut AFR rates by 1p per mile across all bands, except for diesel cars with an engine of 1,600cc or less. 

While this drop reflects the fact pump prices have fallen, TMC has analysed fuel card transaction data and audited mileage reports from 10,000 cars on its mileage capture database, and found that a typical company car driver went from break-even to making a loss on fuel costs.

Drivers of small petrol cars are worst hit. The new AFR for under 1,400cc cars equates to them paying £1.08 per litre for petrol when the prevailing price was £1.19 per litre. Over 10,000 miles, this is equivalent to £120.

At the other end of the scale, drivers of petrol cars over 2000cc, who on average made a profit of 2.4p per mile before March 1, still receive nearly 1.5p per mile more than their actual average fuel cost, which is baffling says TMC.

Paul Hollick, managing director of TMC, said: “We have all noticed a fall in pump prices recently which is probably why HMRC have cut all but one of the bands by 1p per mile.

“Yet there is more to consider that just pump prices. The miles per gallon vehicles are achieving largely affects the cost per mile.

“As a result, many drivers aren’t recuperating their full fuel costs, which is reflected in a poll of fleet managers taken by Fleet News last month, that found three-quarters of respondents don’t think the new rates reflect the real cost of fuel.”

    TMC average real-world
fuel cost*
Avergae UK Fuel price on 01 March 2019 Fuel Price implied by PREVIOUS AFRs Fuel price implied by NEW AFRs
    Pence per mile £ per litre    
Diesel Under 1600cc 10.9 £1.30 £1.19 £1.19
1600-1999cc 11.9 £1.31 £1.20    
Over 2000cc 14.0 £1.30 £1.21    
Petrol Under 1600cc 12.2 £1.20 £1.17 £1.08
1600-1999cc 14.8 £1.21 £1.13    
Over 2000cc 19.6 £1.35 £1.28    

* Real world fuel cost based on actual MPGs of sample 10,000 cars on TMC Mileage Capture database and UK average petrol and diesel pump prices during week commencing 1.3.2019

Hollick added: : "When talking to drivers who are unhappy about the situation, it is fair to ask them whether they have calculated their actual mpg and fuel cost to see how it compares with the AFR.

“Under the pre-March AFR, our data showed a 50-50 split between drivers who profited from the AFR and those who lost out, so on balance, the rates were 'right'.

“With the new lower rates, around 70% lose out. For many drivers, a lighter touch on the accelerator may improve their MPG enough to offset the cut in fuel expenses.

“If firms pay drivers a higher fuel mileage rate than AFR, it makes the driver liable for costly fuel benefit-in-kind tax unless the employer can prove to HMRC that the driver's actual fuel costs justify the rate paid.”

TMC has found that an increasing number of companies reimburse drivers based on the actual cost of their fuel which means they won’t be affected by changes in the AFRs.

Actual cost reimbursement requires accurate records to be kept detailing business mileage and fuel spend.

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