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The Rise of The Grey Fleet

Most organisations will occasionally find it convenient to allow staff to use their private car for business travel. In terms of administration and cost, paying a fixed mileage allowance for the use of a private car can be the simplest solution as opposed to providing pool cars or arranging a daily rental vehicle.

Be careful because there are several issues relating to the 'grey fleet' which need careful consideration.

Employers are liable to reimburse up to 40p per mile for the first 10,000 miles per annum and then 25p per mile thereafter without any benefit in kind tax implications for the employee. There is also no Class 1A National Insurance implications for the employer.

However, employers should consider that for journeys above 80 miles in a day it may prove cheaper to use a daily rental car than the employee's own vehicle. Bear in mind also that for many employees the opportunity to claim 40p a mile, compared with the marginal cost of driving an extra mile of probably less than 20p, is itself an incentive to travel further! Despite this, for many people who travel short distances or indeed travel infrequently, use of their private vehicle will remain a flexible and convenient option.

On average, grey fleet vehicles will be older and create higher emissions than company vehicles or daily rental vehicles. This combined with mileage rates (which may create the incentive for additional travel) means that companies need to look carefully at the impact their grey fleet may have on its total emissions.

If employees' cars are used for business travel, the employer still has a duty of care to ensure the car is fit for purpose. The car must have a valid MOT (if appropriate), is insured for business use and that the employee has a valid driving licence. It is vital that businesses have the appropriate checks in place to meet their legal responsibilities. If in doubt about the insurance, please take advice as this is crucial for the employer as well as the employee.

Posted on 20th April, 2010