Fuel Cards: A Complete Guide for Small Businesses

For most businesses with deliveries or stock, fuel costs will be a considerable expense. For some, it will be one of the biggest costs of all. You don’t have to operate a vast fleet of company cars or vans for this to be true. If you have employees who drive for business purposes on at least a semi-regular basis, fuel costs quickly add up.

Fuel cards were developed to let businesses better manage and control their fuel costs. Very simply, business fuel cards are better than either cash or company credit cards for buying fuel. They let you more accurately separate business and private mileage, provide money-saving insight into your fuel use, and minimise the time spent on administration and accounting. And, of course, they are a lot more secure than carrying wads of cash around.

With that in mind, it’s no wonder that more businesses are turning to fuel cards. Robert Speight, a senior analyst at business intelligence service GlobalData, predicts that the number of fuel cards in Europe will grow 8.9% over the next six years. “The main source of this growth will come from fleet vehicles as small domestic fleets turn to fuel cards to remain competitive as fuel and transport costs rise towards 2022,” he says. Other research forecasts the global fuel card market to be worth $842,410 million by 2023.

Chapter 1

How do fuel cards for business work?

Fuel cards work like any other payment card, except that you can only buy fuel (and sometimes other motoring-related goods) with them. Employees fill up at one of the provider’s network of petrol stations and pay with their fuel card. The company is billed directly, usually at the end of the month. Interest isn’t added to purchases, though fuel cards come with their own fees. 

Fuel cards can be linked to both a driver and vehicle, or either a driver or vehicle. Some offer discounted fuel, too. 

What can you buy with a business fuel card?

You can buy fuel (obviously!) and oil with fuel cards for business, and some cards will also let you buy car wash credits, vehicle accessories and some shop goods, as well as pay for parking in some locations. Some let you limit purchases to a set of pre-selected categories.

Where can you use business fuel cards?

Each card issuer uses a different network of petrol stations. Some cards are restricted to one brand of petrol station, while others let you use several locations and even supermarkets. The network size can be a distinct restriction on use. 

Tracking mileage

One further benefit of fuel cards is that they let you more easily separate business and private mileage. Some cards ask employees to report mileage when buying fuel, giving an accurate representation of monthly driving miles. By calculating the miles driven for business and private purposes, you can accurately and fairly ask employees to reimburse the company for fuel spent on private journeys, avoiding some of the complex tax treatments we’ll discuss later. 

Chapter 2

Putting fuel cards to work in your business

Fuel cards are not just useful for fleet managers. Small businesses, freelancers, sole traders and owner-operators can all benefit from being able to easily track and manage fuel spend. 

The benefits of fuel cards for business management

Reducing fuel spend

Some cards offer discounts, but that isn’t the only way they help you reduce fuel costs. 

Reducing administration

Fuel cards for business can save you money by significantly reducing administration time.

How much do fuel cards cost?

Business fuel cards typically charge a range of fees. Different providers tend to offer their own combination of fees, discounts and sweeteners, so the best card for you will depend on your circumstances and usage.

Typical fees (and possible costs) include:

In this instance, a diligent user who only uses the provider’s network keeps his card safe and is happy with electronic invoices would pay £58 a year in fees, assuming he fills up once a month and meets minimum usage terms. Other providers might charge fewer fees but may not offer discounts, reward schemes or other sweeteners. In some cases, providers charge no transaction fee but insist on a high minimum monthly spend. Compare and contrast before you commit.

Considerations when choosing a business fuel card

Read our dedicated article for a more in depth look at what to consider when choosing a fuel card for your business

Chapter 3

The tax treatment of fuel

Fuel used for business purposes is exempt from taxation (other than the whopping tax already applied at the pump) and reporting.

But if your employees use company cash (in any form, including business fuel cards) to pay for fuel used for private journeys, including travelling to and from work, it becomes a taxable benefit and subject to National Insurance payments. 

To avoid this, you need to ensure that your employees only buy fuel for business use, which may be all but impossible in many circumstances. Failing that, make sure staff reimburse the company for the full value of the fuel used for private trips. That will involve keeping a detailed mileage log, and working out the precise fuel cost per mile.

Alternatively, you can use the latest government advisory fuel rate, a flat rate per mile that makes calculations simpler.   

VAT treatment of fuel

Similar rules apply to the treatment of fuel in regards to VAT. VAT is charged every time you fill up, but the VAT on fuel used for business purposes can be reclaimed in full. But again, you have to be able to prove that the fuel has been used only for business purposes. That means keeping a detailed mileage log that details the miles driven on private and business trips, and doing the maths to work out how much of the VAT on any fuel purchase can be reclaimed.

An easier method is to add a flat rate road fuel scale charge to your VAT return to account for private consumption of fuel on a business vehicle. This is based on CO2 emissions and frees you from having to keep detailed mileage records if the vehicle is used for both personal and business use. You can then claim back all the VAT on fuel for the vehicle.

It’s worth repeating that the simplest way to avoid complex tax treatments is to only let employees buy fuel for business purposes or, if that is impossible, ensure they pay back the cost of fuel used for private journeys in full. 

Chapter 4

Using prepaid cards for fuel

As we’ve seen, using fuel cards is a great way to track and manage fuel spend, reduce time spent on administration and even reduce fuel costs. But you can get all those benefits, and many more, by using prepaid money cards instead.

Prepaid cards are cards preloaded with company money. Employees get one card for a range of business expenses, including fuel. But spending limits and category restrictions keep you fully in control of expense spending regardless of what it’s on.  

A full-featured prepaid card like Soldo offers the following benefits:

Many fuel cards for business send you HMRC-approved invoices, reducing admin time. Prepaid cards don’t, but solutions like Soldo allow employees to snap receipts instantly with a smartphone camera, and add them to expense reports with a simple tap or click. Come tax time, Soldo integrates seamlessly with accounting software for small business, making the lives of your finance staff easier. If anything, it’s the easiest way to calculate and reclaim VAT.

With prepaid cards, employees are given the freedom to spend company money when they need to, but always with appropriate oversight. Soldo lets you set sensible spending limits based on individuals, departments or categories (like fuel). You can set daily spending limits and restrict – for example – cash withdrawals. Finance staff are alerted every time a purchase is made.

Real-time monitoring means spending can never spiral out of control, and a         sophisticated management platform alerts you if spending limits or rules are close to being broken. In addition, in-depth reporting gives you actionable insight into how your business spends money, and where savings might be made.

Why make your employees carry two cards when one will do the job of both? Soldo prepaid cards can be used to buy everything from fuel and hotel rooms to office stationery and training courses. And it gives you the information you need to reduce costs and find efficiencies in each category. 

Because most fuel cards offer a line of credit (you buy the fuel now and pay for it later), fuel card providers tend to run credit checks. If you don’t have the necessary credit score, you won’t pass. With prepaid cards like Soldo, you don’t have to share your credit history to apply. Proof of identification is all you usually need to provide, alongside some basic company details.

With Soldo, staff no longer have to carry around a wallet-full of cash or receipts, and nor do they have to fund the business with their own money. That’s true of fuel cards as well, but only when it comes to fuel. A prepaid business card means employees never have to get into financial difficulty waiting to be reimbursed for a range of business expenses. 

Chapter 5

Prepaid cards for fuel: a case study

Titans Siting and Transport

With Soldo I know I’ve always got my drivers’ backs”

Titans has been transporting mobile homes and modular and amenity buildings across the UK, Ireland and Shetland Isles for the best part of 30 years. Drivers and engineers spend days on the road, often hundreds of miles from the company’s Wellingborough base. 

The work takes them to the heart of cities and the depths of the countryside. Employees need to be self-sufficient, able to buy fuel – and anything else they need for work or subsistence – wherever they are. Cash is not an option. The cost of a full tank of fuel for an HGV equipped to carry a mobile home can top £500. 

Debt worries

For many years Titans used company credit cards to give mobile staff the freedom to spend on company business. But high fees and spending limits threatened spiralling debt. A dedicated fuel card was the next obvious option, but with customers the length and breadth of the UK, and sometimes in remote locations, Titans didn’t want to be restricted to a provider’s network of filling stations – and the heavy charges for filling up off-network.

There was also the problem of reimbursement. Fuel cards might pay for fuel, but drivers and engineers often needed to spend nights away en route or on site, meaning accommodation and meals would have to be paid for with private funds and claimed back from the company. This left employees out of pocket, something Titans thought unacceptable.

Giving freedom 

The solution was Soldo. Soldo prepaid cards let drivers spend company money in any location and on anything. Predetermined category and value limits avoid inappropriate spending, but these can be changed with the click of a mouse.  

If a job takes longer than expected, the team back at base can load more cash onto cards in an instant. 

Drivers are given the freedom to spend on the things they need to properly do their jobs. Back in Wellingborough, Karen Green, the Soldo account administrator at Titans, is notified whenever a driver makes a purchase, so she knows exactly what is being spent, when, where and by whom, giving her real-time oversight.

Easy integration 

At the end of the month, she has all the information she needs to quickly and easily reclaim fuel VAT, which can be worth £100 for every full tank. Drivers capture receipts, upload them and add notes in a matter of moments, making tax time far easier for Karen and her colleagues. At month-end, Karen applies the filters she needs to generate data-rich two-click expense reports, downloading them in a format that integrates perfectly with Sage – Titans’ accounting software.

Karen says Soldo is the right solution for the company, and especially for the drivers. “We’re a caring company and always look after each other. With Soldo I know I’ve always got my drivers’ backs and the best bit is that I don’t need to do loads of work (or miss out on VAT claims) at the end of the month.”