The Association of Fleet Professionals and the British Vehicle Rental and Leasing Association are calling on the Government to take steps to ensure that the Advisory Electricity Rate (AER) for EVs is fit-for-purpose.
The industry bodies share concerns that the current 4 pence per mile rate, which remains unchanged since 2018, is no longer reflective of real-world conditions, and have written to HMRC to review the current AER level as well as establish an ongoing review process for the AER.
They also want to see the creation of a separate AER for vans and work to begin on creating an advisory fuel rate (AFR) for hydrogen.
Advisory rates are widely used by employers to determine reimbursement rates for employees claiming business mileage, with HMRC publishing updated AFRs quarterly for petrol, diesel, and hybrid vehicles.
The AFP and BVRLA say they will continue to work together on the issue to ensure that the “voice of the fleet industry is heard amongst policymakers.”
Paul Hollick, chair at the AFP, said, “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. Clearly, the fuel costs of these vehicles are not the same.
“The Advisory Fuel Rates (AFRs) used for petrol, diesel and hybrid vehicles recognise that there are different engine sizes that have different fuelling costs. A similar approach needs to be adopted for their electric equivalents.”
Gerry Keaney, BVRLA chief executive, added, “The current AER rate and the process for determining it is not fit-for-purpose. 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. The tax system must catch up and reform of the AER process is needed to ensure parity with the fairer process applied to AFRs.”
There has always been a problem with advisory fuel rates that gearing the rate to the size of the vehicle misses an opportunity to incentivise the choice of smaller vehicles. That’s why I wouldn’t support this call by BVRLA who I guess have a vested interest in financing the most expensive vehicles they can. Choosing a power-hungry electric car is not without environmental consequences: if renewable energy is at a premium, your higher electricity use denies someone else access to renewable kWh and causes fossil fuel use that could otherwise have been avoided.