The Association of Fleet Professionals and British Vehicle Rental and Leasing Association have joined forces to campaign for a review of the electric vehicle advisory reimbursement rate.
The current rate for drivers using an EV on work business is 4p per mile, which has been unchanged since 2018 and that the associations described as “no longer reflective of real-world conditions”.
The two organisations have written to HMRC with a four-point plan for improvement, to make the reimbursement rate fit for purpose. These are:
- Review the current Advisory Electric Rate level
- Establish an ongoing review process for the AER
- Create a separate AER for vans
- Begin work on a hydrogen AER
For petrol, diesel and LPG-powered vehicles, HMRC publishes a quarterly review of rates, based on current fuel prices and vehicle efficiency, with three different rates according to engine size for each fuel type.
“The HMRC’s current rate was set at a time when business use of EVs was in its infancy and is quite a blunt instrument, using the same rate whether for a small city runabout or a large luxury 4×4,” said Paul Hollick, chair at the AFP. “Clearly, the fuel costs of these vehicles are not the same.
“The Advisory Fuel Rates used for petrol, diesel and hybrid vehicles recognise that there are different engine sizes that have different fuelling costs,” he continued. “A similar approach needs to be adopted for their electric equivalents.”
“The current AER rate and the process for determining it is not fit-for-purpose,” added BVRLA chief executive, Gerry Keaney. “It has the potential to compromise the uptake of electric vehicles, as employees will not, in many cases, be adequately reimbursed for their business travel costs.
“A fifth of BVRLA members’ fleet already has some form of electrification and this figure is only set to increase as more people look to upgrade to cleaner vehicles,” concluded Keaney. “The tax system must catch up and reform of the AER process is needed to ensure parity with the fairer process applied to AFRs.”