Businesses have to deal with ever-increasing operational costs with fuel usage being one of the main expenses eating away at their profits. Fuel costs, if not properly managed, can have a great impact on overall profitability and should therefore be carefully and diligently managed.
Many companies give their employees access to company vehicles to perform their daily business duties.
This holds many benefits for both the business and employees. Amongst others, it helps improve employee performance and allows better management of company assets.
One challenge, however, in offering employees a company car is that some employees – who use a business fuel card – can end up using the vehicle and fuel for personal travel.
Inaccurate fuel claims can raise a business’s fuel bill and operation costs, leading to unnecessary financial expenses and reduced profits.
Making use of a business fuel card for fuel purchases can help businesses more accurately track their employees’ monthly fuel expenses and ensure that employees repay fuel costs spent on personal trips.
In this article, we’ll tell you everything you need to know about company fuel cards, their benefits and how to best manage personal fuel use when using a business fuel card.
Company vehicle policies
Setting up a company vehicle policy can help keep employees informed about their rights and responsibilities when using a company vehicle and fuel card.
To set up such a policy, consider the following:
- When is the use of the company vehicle considered to be for business use?
- When is the use of the vehicle considered personal use?
This allows all parties to be certain of when vehicle usage is deemed as business mileage or private mileage.
Guidelines for what constitutes business mileage
Business mileage refers to any mileage driven by employees when they are “wholly and exclusively” engaged in work.
This includes an employee driving:
- to complete work (such as doing deliveries)
- between two different workplaces for the same job
- from his/her home to a business client
- to a temporary workplace
All trips undertaken by an employee – using a company vehicle – that do not fit the above requirements are considered private mileage.
Other trips or private journeys during which an employee may quickly attend to a work-related matter also do not qualify as business mileage.
Use of fuel cards and its benefits
Using business fuel cards ensures that your company vehicles always have sufficient fuel for business-related trips.
These fuel cards can be used at a range of petrol companies and fuel stations and eliminate the need for employees to use cash or their own personal cards to purchase fuel.
Here at Crystal Ball, we make use of BP-issued fuel cards which can be used at any participating BP fuel station.
Ease of use
All fuel transactions are recorded digitally, reducing admin costs and the need for paper-based record-keeping to track and manage fuel expenses.
While fuel is a recurring expense, unnecessary usage can lead to bloated costs. Personal use of company vehicles, even for short distances, can accumulate over time, affecting the bottom line.
As businesses are increasingly held accountable for their environmental footprint, managing fuel use is a tangible step towards sustainability.
Consistent overuse can speed up wear and tear, leading to frequent maintenance and reduced vehicle lifespan.
Understanding fuel consumption patterns can inform future fleet purchase decisions, leaning towards more fuel-efficient models.
The built-in safety features of fuel cards make it difficult to process fraudulent fuel transactions if fuel cards are misplaced or lost.
What is the fuel benefit charge?
UK employees who use a business fuel card for business trips do not pay fuel card tax. Using a company card to buy fuel exclusively for business mileage is not classed as a taxable benefit.
However, the fuel benefit is a taxable benefit. It typically involves providing an employee with fuel for their personal use, often in the context of a company car or vehicle. This tax liability is paid for by the employee because they use the fuel that’s paid for by the company.
If a company does not subsidise this benefit, tax will be paid on the full amount. This means that the value of the provided fuel is treated as additional income for the employee and is subject to taxation. The employer will also need to make National Insurance contributions on the fuel benefit.
The power of vehicle tracking in fuel management
Installing vehicle trackers in your fleet is an effective way to monitor how often an employee uses their company vehicle and fuel card for personal use. This makes it a game-changer for businesses aiming to manage fuel meticulously. Here’s how:
Detailed fuel consumption reports
Obtaining insights into daily, weekly, or monthly fuel consumption is a great way to reveal patterns of driver behaviour, helping identify instances of potential personal use or inefficient driving habits.
Vehicle tracking systems can suggest the most fuel-efficient routes for drivers, reducing unnecessary mileage and, by extension, fuel use. The GPS data collected and transmitted by car trackers also helps fleet managers monitor the location and routes employees use while driving company vehicles. This means fleet managers can determine whether the trips were for business purposes or personal travel.
Unauthorised usage alerts
With real-time alerts about when vehicles are being used outside designated hours, this helps to ensure company vehicles are being used strictly for business purposes.
Prolonged idling can waste significant amounts of fuel over time. Monitoring can help reduce such instances, conserving fuel.
Set virtual boundaries and get notified when vehicles exit these zones. This feature ensures vehicles stick to business-related areas, reducing personal detours.
Creating a fuel management policy
For effective fuel management, integrating vehicle tracking solutions isn’t enough. A robust fuel management policy is paramount. Below, we have outlined how to draft one for your own business:
Clearly outline the difference between business and personal use. Can employees use company cars after business hours? Is there a mileage limit for personal use?
Host training sessions on fuel-efficient driving habits. These could include maintaining optimal speed, avoiding rapid acceleration, and understanding route optimisation tools.
Establish monitoring mechanisms
Use vehicle tracking solutions to monitor fuel consumption continuously. Ensure that data is accessible to decision-makers in the company.
Clearly define repercussions for policy breaches. This could be a warning system, a reimbursement policy for personal fuel use, or restrictions on using company vehicles.
Review and revise
Regularly assess the effectiveness of your policy and the technology in place. Make necessary amendments to stay up-to-date with the evolving needs of your fleet.
Conclusion: Optimising Personal Fuel Use in Company Cars
Allowing staff to use a company fuel card for personal use is a great way for businesses to keep track of the business’s monthly fuel expenses.
It allows business accountants to monitor how much of an employee’s fuel spend is for business miles or personal travel. Employees then, at the end of the month, reimburse the business for the fuel they used for running personal errands.
Having a clear company vehicle policy in place ensures employees are aware of their rights and responsibilities when using a business vehicle and fuel card. If properly implemented, such a policy can help reduce fuel card misuse, fuel expenses and save money.