New AFRs from 01 June | Electric company car mileage rate cut

"HMRC has published new Advisory Fuel Rates (AFRs), effective from June 1, which include a 1 pence per mile (ppm) cut to the Advisory Electricity Rate (AER).

The reimbursement rate, used by many electric company car drivers claiming back fuel costs from their employer, was maintained at 9ppm following the last quarterly review in February, after being reduced by 1ppm, from 10ppm, at the end of last year.

The new AER of 8ppm will be met by dismay by many fleets who say that the mileage rate does not adequately reflect the true cost of charging being faced by company car drivers.

In its Tax and Regulation Manifesto, published ahead of the forthcoming General Election, the Association of Fleet Professionals (AFP) has called for the AER to be reviewed.

It says that having one rate for all vehicles – covering every vehicle from small cars to large vans – does not work, especially with the one rate only focusing on those that charge at home.

“We believe there should be four rates as opposed to one,” the trade body says. “A rate for cars with access to home charging, a rate for cars without access to home charging, a rate for vans with access to home charging and a rate for vans that are charged on the public network.

“The cost disparity between a small electric car that is predominantly charged at home and a van that is charged using the public network is significant and one AER to cover all vehicles and charging types doesn’t suffice.”

The AER for fully electric cars is calculated using electrical price data from: the Department for Energy Security and Net Zero (DESNZ); Office for National Statistics (ONS); car electrical consumption rates from the Department for Transport (DfT); and annual car sales volumes to businesses from Fleet Audits average for the past three years.

The DESNZ annually published “pence per kilowatt hour” cost is uprated by the quarterly ONS Consumer Prices Index for electricity to account for quarterly price variations, says HMRC.

The value of the annual equivalent rate is then calculated by taking the cost of electricity per mile for each model provided by the DfT and electricity price data from DESNZ and ONS.

Based on company car sales data across the past three years, a weighted average value of the electrical costs per mile for a fully electric car is then calculated.

AFRS increased for diesel and petrol cars

Elsewhere, the new AFRs for diesel company cars have all increased by 1ppm due to higher pump prices used by HMRC to determine the rates.

A diesel company car with an engine size of more than 2,000cc increases from 19-20ppm, while the new AFR for a diesel vehicle with an engine from 1,601-2,000cc rises from 14-15ppm.

For diesel cars up to 1,600cc, the new reimbursement rate will be 13ppm, up from 12ppm. 

All three rates for petrol company cars have also been increased. 

The AFR for petrol vehicles up to 1,400cc increases by 1ppm, from 13-14ppm, and increases by the same amount for the 1,401-2,000cc bracket, from 15-16ppm.

For vehicles with a petrol engine over 2,000cc, the AFR has been increased by 2ppm, from 24-26ppm. 

The rates for LPG vehicles, meanwhile, have remained unchanged, staying at 11ppm for vehicles up to 1,400cc, 13ppm for vehicles with an engine size of 1,401-2,000cc, and at 21ppm for vehicles with an engine greater than 2,000cc.

Hybrid cars are treated as either petrol or diesel cars for AFR purposes.

Full tables are available on Fleet News FAQ page." 

 

*Article Source: https://www.fleetnews.co.uk/news/fleet-industry-news/2021/02/26/hmrc-publishes-new-advisory-fuel-rates-afrs-from-March-2023