Review of fuel policy lead to six-figure saving

A review of its company car fuel policy enabled fast-growing Volkswagen dealership Colbornes to make six-figure savings.

Established over 60 years ago, Colbornes carved out its own piece of automotive history in 1949 when it became Britain’s first importer of Volkswagen cars. Today, its forecourts also play host to Audis and commercial vehicles, and following a management buyout of the original family-owned business in 2001, growth has been rapid.

“We’ve been adding an average of one dealership a year since then,” says Financial Director Guy Rowson (right). It’s an acquisition strategy that has cemented the company’s position as one of the leading car dealers in the south east of England.

As Rowson explains, rapid growth and the complexity that goes with it has posed new challenges, not least in terms of ensuring the expanding group is being managed effectively. “We have to be very aware of our processes, procedures and practices,” says Rowson. “We carry out regular reviews every quarter.”

It was at one of those review meetings earlier this year that Colbornes’ management team (supported by Baker Tilly consultants) identified a problem relating to the purchase of fuel for its employees’ company cars. It had been Colbornes’ long-standing practice to issue company car holders with fuel cards that could be used to buy petrol and diesel for private and business journeys. This had not only become expensive for the company, but it also meant that a significant number of employees were losing out.

“The amount of tax many of our employees were paying under the benefit in kind rules outweighed what they were spending on private miles through the fuel cards,” says Rowson.

In purely arithmetical terms it made sense to scrap the fuel card scheme, but Colbornes was anxious to keep staff on side. Working with Baker Tilly, the company analysed spending on fuel and arrived at a formula that would ensure no one lost out.

“We agreed that, in cases where the fuel benefit was greater than the tax charge, we would raise salaries to compensate those affected,” says Rowson. The move was carefully communicated to all relevant staff before fuel cards were withdrawn.

The result was a saving in payment-in-kind tax charges, VAT and employers National Insurance amounting to more than £100,000 a year, but there were other benefits too. Business mileage is now closely monitored, giving the company a much clearer breakdown of spending. Meanwhile, staff paying for their own fuel drive more efficiently and opt for more cost-effective cars – a win for everyone involved.