HYBRID DRIVERS EXPLOIT LOOPHOLE TO COLLECT FUEL AND GREEN TAX BREAKS
Hybrid electric company cars are surging in popularity, with their uptake almost doubling in a year.
The cars are considered green, and so they come with significant tax breaks via company salary sacrifice schemes, meaning drivers can save thousands of pounds by not having to pay income tax on the benefit-in-kind.
But drivers are exploiting the dual capability of the hybrids by never using the electric battery, and returning cars at the end of their lease without ever taking the charging cable from its wrapper.
Those with hybrid cars and company fuel cards can also fill their tanks to the brim at the expense of their employer, and all the while reaping rewards the green emission tax breaks.
According to Cap HPI, which keeps tabs on the market shares of vehicle types, plug-in hybrid electric vehicles (PHEVs) now make up 27pc of fleet vehicles on the road, a 13pc rise from the same time last year.
Yet employers also run the risk of paying over the odds for their workers’ fuel consumption if the hybrid is not being used to its full potential.
Sue Branston, UK lead for international firm Fleet Logistics, said it is quite common to see plug-in hybrids not being used as they should.
“People do do it,” she said. “Employees may have been given a fully expensed fuel card and they will never charge the car, as they can fill it with fuel for free.
“Not charging the car isn’t recommended as if you read manufacturer guidelines for plug-in hybrids, they will always say that you do need to give the vehicle a full charge from time to time, otherwise it will lose performance.
“The car will tell you that you haven’t charged it for a while and need to put electric range on it.
“But some people don’t do it. We do see this happen; some of our clients return a car at the end of a lease and the charging cable has never been touched.”
Ms Branston warned that employers could face a bill from the car leasing company at the end of the term if the vehicle’s battery hasn’t been charged.
“It could be proven at the end of a lease that the vehicle has been impacted by the fact it hasn’t been charged,” she said.
“The report might highlight that the vehicle has been devalued by £500 as a result of this. The leasing firm could then charge the employer to cover that loss. I’ve not seen this happen, though it is a possibility.”
For those without an all-expenses-paid fuel card, there is little incentive in using the electric capabilities of a hybrid due to less favourable reclaim rates.
The Treasury advises a 9p per mile reimbursement for employees claiming business mileage in electric vehicles, while up to 24p per mile is recommended for petrol and 19p for diesel. There is no separate class for hybrids, so PHEV drivers could earn back 24p a mile.
Bradley Post, of tax rebate firm RIFT, has called on the Treasury to change the advisory fuel rates to cater for hybrid vehicles.
He said: “Employees may well be claiming for fuel mileage when they could be using the electric capabilities of their hybrid.
“But the fact that Government guidance notes that hybrid cars should be treated as either petrol or diesel cars for advisory fuel rates gives us some idea of the limitations these vehicles have when used for longer distance business travel.
“Ultimately, until the Government brings the advisory rate for electric vehicles closer to those of other fuels, and to reflect the rising cost of electricity, business motorists will likely continue to err on the side of caution when it comes to claiming for their mileage and fuel.”
Matthew Walters, of LeasePlan, said employers could pay a lower fuel rate to encourage drivers to use the electric capabilities of their hybrid.
He said: “After all, the rates set by HMRC are only recommendations. For PHEVs introduced without a home charge point, and assuming employees have been using the public charging network to charge the vehicle instead, expense receipts can also be monitored to try to drive the right behaviour.
“If employees have been given a PHEV with a home charge point, they can use the smart functionalities, which can be monitored. Employers can then get regular reports on the charging activities of these vehicles and check that their employees are using the vehicles appropriately.”
The Treasury was approached for comment.