Fuel expenses: Everything you need to know

Read on for a spotlight on effective spend management that will keep your staff accountable, all while saving time and money.


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Fuel expenses are higher than they’ve ever been for businesses. Brits alone clock up 145 billion kilometres a year on work-related trips – good thing travel broadens the mind!

It’s bad enough that fuel prices are at ‘rip-off levels’, but fuel expense claims also generate lots of admin. And with 27% of employees – the vast majority of whom get away with it – admitting to inflating their mileage, chances are you’re paying more than you have to.

Read on for a spotlight on effective spend management that will keep your staff accountable, all while saving time and money.

Business Fuel Expenses: what you need to know

 

How are fuel expenses treated for tax purposes?

This will come in handy – you don’t pay tax on fuel expenses if:

  • Staff use the fuel on a business drive. If you pay for fuel for personal trips, it’s a taxable benefit. Which means you pay Employer’s National Insurance and your staff pay more income tax. A drive is a business drive if:
    • Driving is part of the staff member’s job, e.g. they make deliveries
    • The staff member needs to be somewhere that isn’t their usual workplace, such as a client’s office or a construction site.
  • Employees drive a company car. If staff use their own cars for business drives, they must make a mileage reimbursement claim.
    (You can also reclaim VAT on fuel, as long as it’s been used on business drives.)

Alternatively, you can apply the road fuel scale charge to your VAT return. This accounts for private consumption, so you don’t have to work out which travel is business-related and which is personal.

In practice, because only fuel used on business drives is tax-free, staff must keep mileage logs as proof. Logs must at least include the:

  • Date of the journey
  • Start and end points
  • Total mileage covered
  • Reason for the journey (business or personal)

Easy enough to keep in mind for them, but there are a few more things you should be aware of that will make fuel expenses an absolute breeze.

How do you manage fuel expense claims?

The way you see your fuel expense claims can either help your business shine or leave it in the dark. Usually, businesses process fuel expense claims in one of two ways:

  • By applying HMRC’s advisory fuel rates: These are recommended fuel reimbursement amounts. They’re based on engine size and fuel type and updated every quarter.
  • They use fuel cards.

Using advisory fuel rates

HMRC accept advisory fuel rates as correct, so you don’t have to produce receipts as proof.
It’s a huge perk, unless you reimburse actual fuel expenses and these are higher than the advisory fuel rates. If that happens, you’ll need to prove that that’s how much the fuel really cost – or pay tax on it.

Your people still have to keep mileage logs to prove their trips were business-related. And the admin is a nightmare. You’ll either have to:

  • Gather detailed staff mileage logs, tot up business-related miles, and work out what you have to pay every individual, or…
  • Pay for all your staff’s fuel and get them to pay back the cost of personal travel.

Luckily, there are more options you can stack up against this one when weighing the pros and cons.

Using fuel cards

Fuel cards are payment cards, but you can only use them to pay for fuel (and, sometimes, other motoring-related goods).

Your staff fill up at petrol stations within the fuel card’s network and swipe the card. Then, at the end of the month, you get a bill.

Unlike advisory fuel rates, HMRC don’t accept fuel card payments as correct. This means that if what you’re paying works out higher than the advisory fuel rates, you’ll need to produce receipts on request.

That said, fuel cards have several benefits:

  • Staff aren’t out of pocket, so there are no reimbursements to process
  • Some cards track mileage, so you can easily work out business mileage, personal mileage, and how much staff need to pay back for personal trips
  • Discounted rates on fuel
  • More accountability: individual cards link to specific drivers, so you always know exactly how much they’re spending. This discourages fraud. You can also get driving analytics to encourage more fuel-efficient driving, which could cut fuel consumption by up to 40%.

These benefits make fuel cards very attractive. But the fact remains that they’re a rigid solution to a very specific problem.

Because you can only use fuel cards to pay for fuel, you’ll need to handle associated costs such as tolls, parking charges, accommodation, and meals some other way. This means more tedious admin.

And if you fill up at a station outside the fuel card provider’s network, you’ll also have to pay a ‘convenience surcharge’. If this isn’t bad enough, remember you won’t know exactly how much you’re spending until you get your statement (which has to be matched to receipts and uploaded onto your system).

So, advisory fuel rates and fuel cards – less than ideal solutions to your fuel expense management problems.

How Soldo shines a light on fuel expenses

If you think fuel cards generate less admin that advisory fuel rates, then you’ll be delighted to learn how a prepaid card like Soldo makes things even simpler.

It starts like this: each card is pre-loaded with company money. From there, you can set limits based on:

  • Category – not just fuel, but also food, entertainment, and more
  • Department – delivery drivers get a fuel budget, for instance, while HR don’t
  • Individual – you can set different budgets for each person

This way, there are no surprises at the end of the month, and you don’t have to wait for month-end to pay bills.

You can also set budgets based on the length or frequency of a trip, and turn fuel spending off when staff aren’t on the road. How useful is that?

More to the point:

  • Unlike many fuel card providers, Soldo doesn’t require a credit check, because it isn’t a line of credit. All you need is proof of ID.
  • Staff can use Soldo at any petrol station and also for other types of purchases, so there’s no need to carry more than one card. And because you can set daily, weekly, monthly, and individual limits and category restrictions, you’re in control of what everyone can spend
  • Staff can upload receipts instantly and connect them to a specific transaction. Soldo’s dashboard also integrates with your accounting software, so there’s no need to input data manually
  • Transactions are recorded in real time, so you can see what your fuel spend is like at a glance, who’s spending most (and least) on fuel, plus in-depth analytics on your broader spending

Soldo will give you a brighter perspective on your fuel spending, allow you to make better decisions driven by insights, and save you loads of admin time. What’s not to like?

Total control and a clear view of your fuel expenses

Employees are lending companies £321 million a month through out-of-pocket expenses. People can halt client meetings and marketing efforts if you consistently delay reimbursements.

The right expense management service can save you from some serious damage. It can give you the tools to budget, track, and speed through month-end bookkeeping.

Whether it’s to cover fuel expenses or other business-related costs, Soldo can help you make life easier for your people – without you having to take your hands completely off the steering wheel.

 

How Soldo works for you

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