The Association of Fleet Professionals (AFP) is demanding immediate clarification from HMRC regarding new rules governing electric company car reimbursements, warning that current guidance is creating widespread confusion across the industry.
Split Rate System Causes Confusion
The Labour Party government introduced a second advisory electric rate (AER) in September aimed at reimbursing company car drivers for using public chargers. The new rate of 14 pence per mile, effective from 1 September, now operates alongside the existing rate of 8 pence per mile for domestic charging.
Paul Hollick, chair of the AFP, stated that while the fleet sector initially welcomed the split-level rate after long campaigning for its introduction, the implementation has proven problematic. "AERs exist to provide businesses with a useful simplification when it comes to employees reclaiming fuel costs but the new system is almost unusable as it stands," he warned.
Implementation Challenges and Risks
Hollick explained that the ambiguity surrounding how to apply the new rates has left most fleets unable to proceed confidently. "How that advice might be implemented is open to wide interpretation and few fleets are confidently proceeding," he continued.
The industry body emphasizes that clarification is urgently needed regarding the required methodology and evidence, particularly for coding into existing systems. "Almost no-one wants to go forward risking they'll adopt the new AER regime incorrectly and face considerable tax back payments and even fines at some point in the future," Hollick added.
Current guidance suggests that only drivers exclusively using highway charging can safely apply the 14ppm rate. Choosing the lower 8ppm rate represents the conservative option but means drivers who use significant commercial charging alongside some domestic charging continue to be financially disadvantaged.
Proposed Simple Solution
Lorna McAtear, AFP deputy chair, suggested that a declaration-based system would provide the simplest and fairest solution. "If a driver has a home charger, they sign a declaration stating that fact and are treated as an 8ppm claimant. If they don't have a home charger, they sign a similar declaration to that end and claim everything at 14ppm," she explained.
This method would be straightforward to administer and would enable fleets to easily add additional amounts to their per-mile rate if they choose. McAtear noted that both AERs are arguably too low, particularly the higher rate for drivers using highway rapid chargers, but the simplicity of the proposed system would allow employers to boost payments easily.
The AFP's call for clarity comes as fleet managers struggle to explain to employees why they cannot consistently pay the higher rate, despite drivers being aware of its existence, creating tension and perceived unfairness within organisations.
