Jim Salkeld, Chairman of Toomey Opticar assesses the success of AMAPs and suggests that aligning rates with emissions may be unnecessary
When a change to mileage rates was first discussed back in the late ‘90s, I felt that the move away from AMR (Authorised Mileage Rates) to the proposed AMAPs (Approved Mileage Allowance Payments) was a positive one in most respects, and had clearly been well thought out.
The original objectives of encouraging more efficient cars, fewer “unnecessary” business journeys and a simpler system to administrate appeared quite achievable, although I did have some reservations over the sustainability of the rates in terms of meeting actual costs.
The latest HMRC initiative calls for a further review of AMAPs and suggests that one key objective could be to align rates with emissions. This sounds like a great idea, if it can be achieved with little or no additional administration, and could potentially accelerate the take-up of “greener” cars. However, before giving unconditional support it makes sense to assess the success or otherwise of AMAPs to date. Unfortunately, with little or no published figures upon which to reach a conclusion, I can only go by my own experience in fleets that we manage.
Several of our larger fleets have adopted a dynamic mixed-fleet policy with a combination of Company Cars, Personal Car Contracts (where AMAPs are fully utilised) and Managed Cash Allowance. One of these is an excellent example, as drivers fall fairly evenly into each category at around 40 per cent, 30 per cent and 30 per cent of the above options.
To discover where we are with this fleet and to see what effect their new fuel policy is having on car selection, we compared the average emissions in April 2005 with those in April 2007. The result was quite surprising, with an average CO2 of 182 in 2005 dropping to an average of just 159 in 2007. Considering that this includes some 250 cash allowance drivers with a free choice of new or used car (subject to policy parameters), it is not a bad result.
In fairness, I suspect that the reduction is more influenced by fuel consumption than any other factor, as although we manage a large fuel card population for them, the drivers have the fuel spend deducted in full each month and are paid Advisory Fuel Rates for any business miles they travel. For the cash allowance drivers in particular, this means car choice directly affects their pocket. Not just in terms of sufficient business fuel compensation, but also where they need to claim the remaining AMAP tax relief to help fund the car.
Although free choice naturally leads to a few gas-guzzlers, there is evidence to show that the majority of the cash allowance drivers are selecting greener cars. Originally mostly “perk” drivers of large-engined cars, the shape of this population is slowly matching that of the Personal Car Contracts, bearing in mind that we are seeing more “business need” drivers in both categories mainly as a result of the tax regime change in 2002/03.
This one fleet gives an indication, but only about 60 per cent of drivers are influenced by AMAPs, and those in the Personal Car Contracts do not see any change as a cost to them (it affects only the business). Although I’m beginning to get the feeling that “it ain’t broke” I thought I ought to look at another fleet, this time a pure “ECO” fleet where an industry colleague wanted to see what affect the proposed CO2-based AMAPs could have on the business.
The fleet was fewer than 200 cars, but with very mixed mileage profiles and car selections. The actual AMAPs paid in the tax year amounted to £560k. If the proposed CO2-based regime were in place at the time the payable AMAPs would have amounted to £592k. Not a huge difference, but an increase nevertheless. Given that manufacturers are reacting with more efficient engines, this suggests that the change could ultimately decrease revenue to the exchequer, especially where ECO and “business need” cash cars are concerned. Maybe not such a good idea then.
In conclusion, and despite supporting the aims of the exercise, I am not convinced that any adjustment to AMAPs will achieve anything meaningful in the way of reduced emissions and/or a better alignment of rates to costs. In my opinion, the rates should be maintained as they are, and the underlying costs examined to see how these could provide a more useful incentive to select greener cars. CO2 and fuel consumption go hand in hand, so despite the political sensitivity, I recommend that attention be directed to the one area where price can affect demand, and perhaps not just change car selection, but also promote car sharing and other forms of transport. Fuel.