If you read nothing else, read this….
Fuel cards are effective for capturing employee mileage and fuel consumption data more accurately
Fuel cards can simplify administration and the burden on payroll processes
Fuel cards are often confused with offering staff free fuel
The tax advantages of offering free fuel for private use have been eroded
Fuel cards can reduce fleet administration and costs, as well as capturing mileage and fuel consumption data, says Nic Paton
Slow-moving convoys of angry truckers, refinery blockades and panic buying at the pumps. The fuel protests of 2000 may seem like a distant memory, but the price of petrol is also set to be a huge issue for fleet managers and benefits specialists this year.
Prices at the pump are forecast to rise sharply in 2010, with the Petrol Retailers’ Association predicting a 5-10p a litre rise through tax changes alone, not taking into account possible oil price hikes.
As well as value added tax (VAT) returning to 17.5% and more duty increases due in April, the new financial year will also see further erosion of benefit-in-kind tax breaks for company-funded fuel for private use. According to HM Revenue and Customs (HMRC), the government-set figure for calculating the tax due on this will rise from £16,900 to £18,000.
Many employers still equate fuel cards with giving staff free fuel. Meryl Gilbert, head of business development at provider Arval, says: “There is a misunderstanding that fuel cards equal fully-expensed fuel.”
Tax benefits disappearing
The tax benefits around this once-popular perk have been gradually disappearing for eight or nine years as the government’s green agenda has focused on discouraging road usage. But this does not mean the fuel card itself is in decline – far from it. In the current tough economic climate, employers are increasingly recognising the administrative and cost benefits of fuel cards.
“There is reduced administration, consolidated invoicing, employers can claim back VAT and the invoice is approved by HMRC for tax purposes, so they do not need to retain receipts,” says Gilbert.
By comparison, reimbursing fuel costs through conventional expenses can be time-consuming, put pressure on payroll staff and there is a risk that the fixed rate is set too high or too low. Employers also have to rely on employees filling out mileage forms accurately. What is more, staff may be disgruntled and out of pocket while they wait to be reimbursed for their outlay.
Clamping down on inaccuracies
Jon Burdekin, head of account management at leasing company Alphabet, says: “The emphasis is now on efficiencies and clamping down on inaccuracies, rather than the option of free fuel. One [organisation] with a 900-strong fleet has seen a 15% reduction in its fuel bills since introducing fuel cards and is better able to control its costs.”
Most fuel cards operate on a set network of fuel stations or sometimes on a single brand of fuel, although many are now multi-branded. Arval’s card, for example, can be used in 95% of UK filling stations where the AllStar logo is displayed. Cards will normally operate on a fixed-price or pump-price basis. The former, more commonly used for diesel cars, means a set weekly rate is paid for fuel. The latter is used to pay the price displayed at the pump.
Given that filling up with fuel is normally a relatively small transaction (probably £40-£60) carried out frequently, an attractive finance method is centralised billing and mileage capture that accurately records and reimburses what has been paid for.
Better monitoring of fuel
Chris Chandler, associate director at Lex Consultancy Services, says: “Employers do not take full advantage of what they can get from better monitoring of their fuel.”
Fuel cards can also be a useful tool to educate staff about their fuel use, showing them the value of, say, not filling up at more expensive motorway service stations if they can avoid it. Cards can also flag up possible fraudulent transactions, for example, if an employee is regularly filling up twice a day or over a weekend, appearing to put in more fuel than there is capacity in the tank.
However, most employers use fuel cards to make life easier for the HR department and employees. “Most of the time it is used for the ease and simplification of purchase,” says Chandler. “The capability is there to manage fuel costs much more effectively.”
Read more about company cars