aer - AFP

Fleets need rapid clarification on how to apply the “split-level” Advisory Electric Rates (AERs) put in place by HMRC in September, says the Association of Fleet Professionals (AFP).

Paul Hollick, chair at the industry body, says the move – which provides an AER of 8 pence per mile (ppm) for domestic charging and 14 ppm for highway charging – had left electric company car operators in limbo.

“Alongside many others in the fleet sector, we were initially very welcoming of the change to a split-level rate, something for which we had been long campaigning in recognition of the widely different costs of private and commercial charging.

“However, the implementation has been confusing at best. 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.”

HMRC’s guidance for split-level AER is that for journeys where a company car is charged at both public and residential locations, fleets can apportion the mileage based on how much charging happens at each place.

Paul said: “How that advice might be implemented is open to wide interpretation and few fleets are confidently proceeding. We require clarification about the methodology and evidencing that is required, especially where it needs to be coded 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.”

In the absence of detailed instructions, most fleets were playing it safe by using the 8ppm rate, he reported.

“Only in instances where a driver exclusively uses highway charging can the 14ppm rate safely be used. Choosing the lower rate is the conservative option but means drivers who use a lot of commercial charging but some domestic continue to be left out of pocket, which is highly unfair. It’s especially difficult for fleet managers to explain to employees aware of the higher AER why they won’t be able to pay them the 14ppm rate.

“We very much believe this is an area where the authorities should be encouraging more drivers and businesses to adopt electric company cars by enabling fair, easy and accurate reimbursement of fuel costs, and this confusion is a definite disincentive.”

Lorna McAtear, AFP deputy chair, added that the government’s moves were expensive to accommodate from a process point of view, with few fleets able to afford to rewrite their software to apportion rates.

“An idea suggested when the new rates were first announced is probably the best and easiest solution, in our view. 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. This is simple to administer and fair in the broadest sense.

“This method also enables fleets to easily add additional amounts to their ppm rate, if they so choose. Both the AERs are arguably too low, especially the higher level when drivers are using highway rapid chargers, and employers could boost the amount they pay easily because the process is so straightforward.”

The AFP, alongside other organisations representing the fleet sector, was collecting evidence to show HMRC how further action was required to make split level AERs practical, Paul said.

“We have a good relationship with the tax authorities and they listen to our feedback but their approach is very evidential. They’ll want to see proof the situation exists as we describe it before further action is taken and then will need to spend time arriving at a solution that works for them and for fleets.

“Our view is that rapid clarity is needed by fleets but the reality is that arriving at a positive outcome could take some time, which is frustrating.”

AER is a ppm reimbursement rate set by the government for employees using a company EV for business travel. These rates are not mandatory, but using them avoids potential tax on benefits for both employer and employee.

We are joining forces with Fleet News to bring you a webinar on navigating the two-tier reimbursement rate.

The Association of Fleet Professionals, together with BVRLA and other key stakeholders, has been lobbying for a fairer reimbursement rate for electric car business mileage ever since the introduction of the Advisory Electric Rate (AER) in 2018.

In response, the Government has now introduced a two-tier AER with an 8p per mile home charging rate and 14p per mile for business journeys fuelled by public charging.

But how should fleets integrate these new rates into their reimbursement policies while staying compliant with HMRC rules – and are better alternatives available?

This webinar will bring together tax experts, fleets and the AFP, and chaired by Fleet News editor Stephen Briers to answer these key questions, discuss next steps and provide vital advice on running a compliant AER policy.

If you can’t attend live, register now, and we’ll send you the on-demand recording later.

In conjunction with the BVRLA, we have been lobbying government to review the AER.

HMRC cannot make any changes without better data and clear justification. In order to review the current AER, they need case studies quantifying how the 5ppm is impacting real drivers.

We need to gather real world case studies of drivers who are out of pocket from the 5 ppm AER in as many diverse job roles, geographies, income demographics and car types as possible

Please can you send us evidence of where your drivers have been under reimbursed by the AER in the following format:

Please send your examples to [email protected] and entitle your email AER evidence. We require the information by the end of June 2022.

News today that the Advisory Electricity Rates (AERs) for electric vehicles (EVs) have been increased by 25% have been greeted as a win for fleets by the Association of Fleet Professionals (AFP) and British Vehicle Rental and Leasing Association (BVRLA).

The AER has been increased to five pence per mile, according to the HMRC’s web site, following intensive conversations with the two trade organisations.

Gerry Keaney, Chief Executive, BVRLA, said: “The EV market is maturing and is no longer a niche. We need a mileage recompense rate that can adapt to energy prices and charging trends, so we are pleased to see HMRC respond so swiftly to the lobbying from AFP and BVRLA.

“The AER for electric vehicles had not changed since 2018, this uplift is a positive move and shows that the Government is serious about providing a supportive environment for the push to zero emission motoring.”

The previous AER specified was just 4ppm which, added Paul Hollick, AFP chair, which generally failed to cover reimbursement of fuel costs when most individuals are now paying closer to an estimated 18 pence per kwh even when charging at home.

“We very much welcome this move by HMRC. In truth, 5ppm is probably still too low – recent research among our members saw 6-7ppm mentioned as an appropriate rate – but it does represent an increase of 25% in one step, which is quite substantial.

“Importantly, it establishes the principle of revisiting and revising the AER rate as part of conversations between industry bodies and HMRC, which is an important development.”

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Support for the used electric vehicle (EV) market is the number one aspiration from November’s Budget for the Association of Fleet Professionals (AFP).

Chair Paul Hollick pointed out that new electric car grants introduced in July had been relatively successful in stimulating retail interest – and a similar move could play an essential role in the second-hand sector.

“While the scheme has not been perfect, it appears to be helping make new electric cars more accessible through both direct grants and widespread, substantial discounting being prompted by increased competition.

“Really, we’d like to see a corresponding initiative for the used sector. While values for second hand EVs have stabilised and the era of large month-on-month drops appears to thankfully be over, consumer interest is still variable and residual values remain simply too low.

“Some form of support that helps to stimulate buyer enthusiasm – which could be anything from direct grants to interest-free loans – would be very well received by fleets.”

Paul said that other EV measures the AFP would like to see in the Budget included scrapping VED for electric cars and vans.

“The increases for electric cars that took effect from April have added quite heavily to their running costs and created a disincentive, while the introduction of VED for electric vans has been counterproductive in a market that is struggling to find its feet.

“We’d also like to see more support for kerbside charging. It appears a relatively cheap and effective solution for people living in terraced houses or apartments has now been identified in the shape of cable gullies, and there should be a commitment to a much wider implementation than the £25 million already allocated.

“There is also a need to encourage more ‘destination’ charging at hotels and other facilities which, according to feedback from our members, is a hole in current network provision that is becoming increasingly apparent over time.

“Additionally, for EVs, we’d like to see a reintroduction of charging infrastructure grants for businesses. Deadlines for the government’s earlier scheme made it next to impossible for those interested in applying to access the fund – something that caused consternation among fleets – so it is presumably unallocated and still potentially available.”

Finally, he added that an ongoing complaint within the AFP was that potholes remained an issue, often causing damage to company cars and vans.

“This was a problem recognised in the last Budget with an extra £500 million allocated but identifying where this money is being spent is difficult because the condition of our roads doesn’t appear to be noticeably improving. We’d like to see more visible progress.”

“They’ve now been in power for just over a year and we do believe this is a government that often listens to fleets and the wider motor industry, taking action such as the recent split level AER rates. However, there is a shortage of money to spend and many of the issues that we’d like to see resolved require both funding and time.”

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A revised Tax and Regulation Manifesto is being launched today by the Association of Fleet Professionals (AFP) ahead of the General Election on July 4^th.

The first edition of the document was created in 2021 and revised early last year. This latest version has grown to 24 points from the original 13, something that underlines the growing number of issues that fleets are facing at the moment, the organisation says.

New additions include finally resolving ongoing confusion over regulations surrounding 4.25 tonne electric vans, new benefit in kind taxation tables up to 2030, the removal of plans to introduce Vehicle Excise Duty on electric vans from April 2025, the need for fiscal support to make electric cars and vans more attractive in the used market, a better labelling scheme explaining the range of electric vans in different weather conditions and with different loads, and improvements to the charging infrastructure including regulatory and fiscal support for accessible, affordable and fit-for-purpose charge points.

Paul Hollick said: “Since the pandemic, the problems that fleets are facing seem to have multiplied, largely as we grapple with the implications of electrification and other zero emissions initiatives. Within our Future Mobility Committee and across our membership, we have been discussing the kind of help we would like to see from government and it is fortuitous that we are publishing this Manifesto just as the general election gets underway.

“Whoever wins power, we hope to work with them to help resolve these many issues, and the document represents the AFP’s core thinking about what needs to be done. It is designed to focus on practical ideas, ranging from quite small detail alterations to major strategic shifts, around which we believe that change or definition is required to enable businesses to move forward with their fleet and mobility plans faster and more effectively.”

He explained that the majority of the points added to the new edition of the document focussed on current issues experienced around van electrification.

“One of the undeniable facts in fleet over the last few years is that van electrification is proving much, much more difficult than for cars. We are now in the situation where the majority of new cars being added to fleets are electric vehicles (EVs) or plug-in hybrids, a percentage that we very much expect to climb over the next few years in a steady and predictable manner towards the 2035 production deadline.

“The same is just not happening for vans. There are issues over the capabilities of the vehicles themselves that make their operational viability for some fleets open to question, while availability of charging is also an ongoing issue for many. In the company car sector, adoption has been powered by preferential benefit in kind taxation, and some kind of government support is needed to really get the electric van market moving in the same manner.”

Additionally, Paul said that interventions were needed in the used market, especially bearing in mind the large numbers of ex-company cars that were starting to enter remarketing.

“A properly functioning used market is essential for the electrification of the UK car parc but there are indications that issues remain, largely around the appetite of buyers for these vehicles. In several countries, governments are offering support such as the interest free loans being offered in Scotland, and we’d like to see more done here.

“The fact is that fleets need to be able to set realistic future residual values in order to viably operate electric cars and vans, and the used EV market needs to be quickly developed to a point of stability in order for this to be possible.”

He added that the AFP hoped the Tax and Regulation Manifesto would serve to prompt dialogue within the fleet industry and political circles, with the general election serving as a useful focal point for discussions.

“As an organisation, we would like to help enable those conversations to take place, and for whoever wins power to take a serious look at the resulting suggestions. Of the points we suggest, several could be implemented quite easily by any new government. Others, such as the need for discussions around a road tolling plan, are very much strategic and part of longer-term shifts in policy.”

2. Confusion over regulations surrounding 4.25 tonne electric vans to be resolved.

20. Parking costs should be linked to shared mobility and public transport solutions

Lee is a proactive, experienced fleet professional with a proven track record of successfully implementing risk management strategies, enhancing operational compliance, and developing robust, cost-effective solutions.

Voted onto the AFP Board in 2022 by members, Lee enjoys understanding fleet management challenges and finding and developing innovative solutions to really make a difference.

As a member of The AFP, Lee has supported projects such as the Kerbside Charging Network, HMRC AER rates and has his sights set on helping members in the following key areas

In addition to his role as Fleet Manager for NG Bailey, Lee is always looking for opportunities to innovate in solutions to improve fleet safety.

A new electric vehicle (EV) mileage cost calculator has been created by the Association of Fleet Professionals (AFP) to help with accurate reimbursement of company car drivers.

It shows potential pence per mile costs for more than 70 models, comparing a variety of home and public charging tariffs in a variety of weather conditions against the current nine pence per mile Advisory Electricity Rate (AER) rate from Her Majesty’s Revenue and Customs (HMRC).

Paul Hollick, chair at the AFP, said: “This answers a very real need from fleets for information about real world EV charging cost performance, given the variance that exists between what is being paid for electricity and how efficiency changes at different temperatures.

“We expect members to choose to use the information in several ways. The first is simply to look at the mileage costs of different EVs and use the figures to inform future decision making, especially which models should be included on choice lists.

“Secondly, it should also support arguments to encourage more home charging and less use of public facilities, showing just how much this impacts on costs on a per vehicle basis.

“Finally, and perhaps most importantly, it will help to enable more accurate reimbursement of drivers for charging. While the increased nine pence per mile AER rate is an improvement, the calculator does show conclusively how it easy it is for this figure to be exceeded in any number of circumstances. We already have several AFP members who are paying substantially more that AER in order to reimburse employees fairly.”

The calculator has been created by AFP member David Watts of Volkswagen Financial Services | Fleet and plans are underway to make the data it produces widely available across the membership body.

Paul said: “This is a good example of how the huge expertise that is available within the AFP can help to create new and innovative tools that immediately help to improve fleet management best practice.”

David Watts, Fleet Product Manager at VWFS Fleet said “Having been instrumental in raising the issue of the Advisory Electricity Rate (AER) and its appropriateness from a fleet perspective, back in 2020 (when it was £0.04), it was good to explore this further with the AFP.

The exercise demonstrated the significant variance in energy consumption across the EV range, coupled with the huge variance in energy costs, depending where and when you charge up – from home and off-peak, all the way through to ultra-rapid charging – together with seasonal variations. This insight was then compared with the HMRC’s AER business mileage reimbursement to develop a more effective tool to support accurate EV charging reimbursements.

Importantly, the new tool will enable fleet managers to more accurately calculate fleet charging costs, ensuring reimbursement strategies are fair for drivers, incentivising the switch to EVs in line with the government’s wider sustainability agenda.”

Fleets Need Rapid Clarification On “Split-Level” AER Rates, Says AFP.

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