THE BVRLA and the Association of Fleet Professionals have joined forces to call upon the UK government to make sure the Advisory Electricity Rate (AER) for electric vehicles (EVs) is fit-for-purpose.

Sharing concerns over the current 4p per mile rate, which has remained unchanged since 2018, the industry bodies say that this is no longer reflective of real-world conditions and recommends HMRC make changes.

These include:

  • a review of the current AER level;
  • establishing an ongoing review process for the AER;
  • creating a separate AER for vans;
  • and for work to begin on establishing a hydrogen AER.

Advisory fuel rates are commonly used by employers to calculate reimbursement rates for employees claiming business mileage. There are already quarterly updates for petrol, diesel, and hybrid vehicles, which take into account the fluctuating cost of fuel as well as other factors.

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.

BVRLA Chief Executive, Gerry Keaney said: “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’ fleets 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.”   

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