Page last updated at 11:05 GMT, Friday, 9 May 2008 12:05 UK

Fuel costs hit company car users

By Danny Savage
North of England correspondent, BBC News

Man filling car with petrol
Fuel prices have risen significantly so far this year

Company car drivers say they are increasingly out of pocket because of rising fuel costs.

Drivers who use their own cars for work also say the money they can claim back per mile is not enough.

Drivers who are issued with company cars can claim back the money they spend on fuel for business miles at a rate set by the government.

But petrol and diesel prices have risen a great deal since the government last set its rates.

This rate varies depending on whether they drive a petrol or diesel car and the size of the engine.

The claimable rate per mile is set by HM Revenue and Customs.

Outdated rates

A driver of a company-owned diesel car with an engine size between 1.4 and 2 litres, for example, currently gets 11 pence per business mile.

I do feel out of pocket because the rate has not increased but costs have
Sandy Goodhall

This rate is based on the cost of diesel being 1.06 per litre.

The average price of a litre of diesel at the moment, according to the AA, is just over 1.21.

People who drive their own car for work can claim about 40p a mile back for business miles.

This is supposed to cover the cost of fuel and wear and tear on the car, but the rate has not gone up for some time.

'Gone up dramatically'

Motorists at a petrol station in Leeds who use their cars for business were generally dismayed at the situation. They were paying 121.9p per litre for diesel and 109.9p for petrol.

Sandy Goodhall runs a business making and selling flags in Leeds and was filling up his Mercedes diesel.

"I do feel out of pocket because the rate has not increased but costs have. Fuel has gone up dramatically," he says.

Debbie who did not want to give her surname was filling up her Mazda6 at the next pump.

This was her own car but she says her husband, who drives a diesel BMW 5 series for work, is not happy.

"He claims back the mileage for business trips but it doesn't cover the cost of fuel anymore," she says.

Switched allegiance

A few minutes later, businesswoman Andrea Olive pulls on to the forecourt in her convertible Mercedes, which she drives for work.

"The rate of 40p per mile hasn't gone up for years but petrol has gone up."

Without me asking she adds, "and yes I voted Labour at the last election but Conservative last week. Fuel charges was one of the many reasons."

HM Revenue and Customs normally set their rates at the beginning of the year and review them after six months.

But their website states: "MRC will also consider changing the rates if fuel prices fluctuate by 5% during each six month period."

The cost of diesel has now risen by just over 14% from the benchmark price, but the rates have not changed.

The average cost of a litre of unleaded petrol is 1.10 per litre.

The HMRC price is based on it costing 1.02 per litre, which is 7.8% adrift.

So, if a diesel car costs 61 to fill up at the pumps and the driver gets 520 miles out of their tank at 11p per mile they get 57.20 back if all the miles driven are for business.

They are out of pocket by 3.80 per tank and a lot of company car drivers fill up twice or more a week.

Rate changes

Building company boss Robert Watson is one of those drivers whose cost is escalating.

"If you work out how much petrol has gone up in percentage terms in the last six months, they should at least put rates up by the same percentage," he says.

"HMRC are aware of the increasing costs of fuel and will be reviewing rates in May," it said in a statement.

"We will announce rate changes on 1 June to take effect from 1 July."

"This will give the employers the one month's notice that they requested to enable them to amend their systems to reflect the rate changes."

However this seems to be the standard review period and not a special measure due to rising fuel costs.

Your comments:

All companies should pay for all fuel then deduct the private mileage only salary
Kevin McCLeery, PLYMOUTH

HMRC has not put up its internal mileage rates in over 5 years - the price of petrol has rocketed in that time and civil servants are in effect having to subsidise the government when travelling on official business
Jim, Derby

I think that perhaps if companies stopped using such ostentatiously expensive gas guzzlers as company cars then the complaints would feel slightly more justifiable.
Ben, Manchester, UK

Our company only gives 22p per mile when we use our own cars!
Klick person, Glasgow

Pretty obvious really - the allowance should be automatically adjusted to take account of fuel costs - its obviously going to get a lot worse..!
David Simmons, London

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