August 5, 2015

ESOS rules make mileage capture essential

Energy audit increases need for accurate recording of business miles

The accurate recording of business mileage – essential for companies that want to manage their mileage expenses more effectively or reduce their carbon footprint – is now even more significant due to a Government-backed energy audit.

If you’ve not heard of it, the Energy Savings Opportunity Scheme (ESOS) was introduced at the end of last year and is a Government-sponsored energy audit in response to EU regulations under the Energy Efficiency Directive.

ESOS looks at the measurement of the energy consumption of large companies in areas such as buildings, transport and industrial processes.

The scheme is being run in the UK by the Environment Agency (EA) and is mandatory for businesses that either employ at least 250 people or have fewer than 250 people but an annual turnover of more than £42.5m and a balance sheet exceeding £35.5m.

The audit covers a 12-month period and businesses are measured in energy units or energy expenditure, in four yearly compliance phases.

Who does ESOS apply to?

Organisations in the UK first had to assess whether they were a qualifying businesses on the qualification date of each phase, the first of which was December 31 last year.

Those businesses that do qualify will have to start submitting energy reports from this December, including energy used by company cars.

ESOS audits must be carried out by lead energy assessors, who must meet a number of competence requirements, while the EA has the authority to issue penalty notices up to £50,000 for non-compliance.

What will ESOS mean for fleets?

The new rules make reporting on fleet energy use mandatory and the emphasis is likely to be placed on any element of grey fleet that exists within the business.

One challenge for fleet managers is being able to identify the business and private mileage split in company-provided vehicles because private mileage is excluded from ESOS reporting, therefore accurate mileage capture is vital.

What are the benefits of mileage capture?

As well as complying with HMRC regulations, effective mileage capture allows accurate mileage expenses to be reimbursed. And it also enables company managers to assess the risks associated with high mileage drivers, as well as flagging up vehicle servicing in advance.

An additional benefit is that it can actually lead to a physical reduction in business mileage, often as high as 25% – business mileage capture, especially online, can be a time and administration saving for drivers, as well as for the company. Mileage capture can also help in reducing the company’s carbon footprint by providing an accurate measurement of how far company drivers are actually driving.

CLM provides a password-protected and secure business mileage capture system, through which drivers are required to enter their mileages at the start and the end of the period, typically monthly. Where required, they are also asked to provide the split between business and private mileage.

The mileage entry is then hyperlinked to the drivers’ manager for authorisation and automatic input into the company’s payroll department. The process is not only accurate and secure, it also meets HMRC rules and is the perfect solution for meeting the ESOS requirements.

The driver is the vital link

The onus is on drivers to accurately complete their mileage records, on time. Those drivers that do not enter their mileages are automatically locked out of the system if they are more than 14 days late with their submission.

At this point, the system assumes all the mileage travelled is private and not eligible for reimbursement. The onus then falls on the driver to contact his or her line manager and explain why they haven’t submitted their mileage claims on time and to try and re-negotiate their mileage reimbursement.

If drivers fail to update their details, they will be unsuccessful in their mileage expenses claim, and can be flagged up in an exception report to the key stakeholders for further action to be taken.

The system can be adapted to take mileages from both bunkered fuel and that bought from the forecourt, through corporate credit cards and fuel cards.

Key benefits for fleet managers

Any mileage capture system should have several core attributes:

  • Reduced administration for fleet managers
  • Full suite of reports detailing total private/business mileage and CO2 emissions, ideal for compliance with new ESOS scheme
  • Automated alerts highlighting non-compliant and high mileage drivers
  • Full integration with back office fleet and payroll systems
  • Flexibility to cover all types of fuel payment methods and reimbursement rates
  • Compliant with HMRC reporting needs and assisting with corporate governance issues
  • Removal of fraudulent expense claims