ACFO is claiming victory in a five-year battle with HM Revenue & Customs that will see the taxman announce revisions to Advisory Fuel Rates effective from June 1.
The UK's premier organisation for fleet operators, which enjoys a close relationship with HM Revenue & Customs, has been pressing for significant changes to Advisory Fuel Rates since 2006 in its regular meetings with officials.
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. They provide a range of rates based on engine size and fuel type, and when used, are deemed to be tax-free.
Historically Advisory Fuel Rates for company car drivers have been reviewed twice a year with the next review scheduled for June 1.
However, starting from June 1, HM Revenue & Customs has agreed to change both the frequency of its review of rates and the mechanism it uses for calculating them.
Following discussions with ACFO, which also conducted a survey of members, HM Revenue & Customs will:
Review Advisory Fuel Rates on a quarterly basis. However, in agreeing to a more frequent review it has withdrawn its commitment to make interim changes if fuel prices vary by 5% or more.
Reduce vehicle manufacturers' published average MPG figures for petrol and diesel cars by 15% rather than the current 10%, better to reflect real world driving condition.
Introduce an additional rate band for diesel cars as a result of the number of smaller engined models now reaching the market. Currently there are two diesel bands - up to 2000cc and over 2000cc. From next month the first band will be up to and including 1600cc models, the second band will be 1601-2000cc and the third band will be 2001cc and above.
Additionally, HM Revenue & Customs has told ACFO that it will continue to review diesel engine bands. In the future it could be that they come into line with those for both petrol and LPG (liquefied petroleum gas) models - up to 1400cc, 1400cc-2000cc and over 2000cc - if the range of smaller engines continues to increase.
HM Revenue & Customs, which will publish the new Advisory Fuel Rates in the next few days, has also confirmed that it will continue to give employers a month's grace to implement the changes meaning that until July 1 either the new or the current rates can be used.
ACFO director Stewart Whyte said: "We are delighted that HM Revenue & Customs has accepted our arguments over Advisory Fuel Rates.
"Our major concern recently has focused on the volatility of fuel prices, which we have witnessed not only in recent months but several times since we started discussing the Advisory Fuel Rates mechanism with officials. However the changes in process highlighted above all meet the suggestions originally made by ACFO and will make the whole process much more robust.
"We are sure that the more frequent review of Advisory Fuel Rates will be welcomed by ACFO members. Overall, while we have yet to learn exactly what the new rates will be, we believe the new mechanism for making the calculation is robust, fair to all sides and easy to implement."
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