Are you losing out on your petrol claims?

May 30 2008 By Bill Midgley for The Journal

In all of the column acres of opinion and comment on the increasing fuel prices there is one issue that has been given little if any coverage, yet it it affects the majority of those individuals who have to make their vehicles available for the benefit of their employer.

n such circumstances most are recompensed on a mileage used basis, set on a scale based on engine size and approved by Customs and Revenue. Not a bad deal for the Employer who does not have to bear the full cost of a vehicle, and, it may be argued, not all that many years ago an opportunity for the employee to help with their own motoring costs.

The problem arises in that Customs and Excise have not increased the levels at which payments can be made without a tax liability to match the spiralling level of fuel costs. The present approved rates have been in place since petrol was little more than half its present price. Good for the employer, not so good for the unfortunate employee. The rate for a medium sized car is 40p per mile, which sounds quite generous. With petrol and diesel costing between £5 and £6 per gallon, however, there is now little left to meet what the payment is also meant to cover, that is the other running costs of the vehicle, notably depreciation and insurance. Premiums for the latter can raise quite steeply when a vehicle is used for the benefit of the employer, a point many who use their cars in this way often overlook and fail to advise their insurers. The result can be refusal of a claim or the invalidation of the cover. The possibility of a prosecution for driving uninsured and even a personal liability.

Companies are at liberty to pay whatever level of recompense they may wish but any rate above the guidelines will result in a tax charge, yet another earner for H.M. Government. So in all of the debate and anger around fuel costs there is the opportunity for the Chancellor to be a little more understanding on motorists who have to use their cars for their work, often subsidising the employer. Hopefully good employers will not hide behind the Chancellor's lack of action but will pay a reasonable rate. They are getting the best out of the arrangement and avoiding the higher cost of fuel, not, perhaps, the best way in which to motivate a workforce.

One further thought. Many jobs are advertised on the basis that the applicant must have a vehicle. Surely that is discriminatory in this day and age, or is the clever way to stipulate that a driving license is a necessary requirement for the post!

Bill Midgley is former chairman of British Chambers of Commerce and chief executive of Newcastle Building Society 1985-98.