Rachel Cockshaw, Fleet and Rental Business Development Manager at Dealer Auction examines how the proposed EV pence-per-mile model might sound like a policy detail, but its operational impact could be significant - particularly for small fleets and rental operators. This blog explores whether this is a straightforward evolution - or a change that could reshape how smaller operators manage risk and accountability.
Small fleet, fleet disposal and digital auction strategy are not usually the first things that come to mind when new tax policy is discussed. Yet following the recent BVRLA RVR Forum, I left thinking that the proposed EV pence-per-mile model could have very real operational consequences for smaller fleets and rental businesses.
One topic that particularly caught my attention was how a pence-per-mile charge might work in the rental environment, especially for short term hire. The current direction of travel suggests estimated annual mileage would be submitted at the start of the year, with a reconciliation once actual mileage is confirmed.
On the surface that feels manageable, but it becomes more complex when vehicles don’t stay within the same business for a full year.
For many small fleet operators, vehicle disposals are not a once-a-year event. Vehicles are sold throughout the year to protect margin, manage ageing stock and maintain cashflow. Whether that happens through retail or a digital auction platform, timing is often commercially driven.
If a vehicle is disposed of mid-cycle under a pence-per-mile model, questions around liability start to emerge. Any under or over payment would need to be accounted for. That may influence sale price, reconciliation processes and internal administration.
For larger organisations, this may sit within a structured finance or compliance function. For owner managed rental businesses or general managers overseeing the full operation, it is another variable to manage alongside utilisation, pricing and customer service.
Small fleet disposal processes tend to be built around clarity and speed. Introducing a mileage-based tax reconciliation into that mix adds a layer that needs careful thought.
Iceland offers an interesting live example. The recently introduced kilometre tax applies to all passenger vehicles up to 3.5 tonnes and is charged at a set rate per kilometre.
The system was largely designed around registered keepers and known driver models, which aligns well with leasing. Rental presented a different challenge because drivers change frequently and therefore accountability is continually shifting.
The solution was to introduce a flat rate structure supported by regular odometer reporting, rather than relying solely on annual reconciliation. Administratively, that creates simplicity. Commercially, it slightly changes the original usage-based principle.
If a similar approach were considered in the UK, it raises an important point for smaller fleets. Would customers accept a flat rate structure, or would expectations around fairness and usage transparency push back against that model?
For small fleet and rental operators, vehicle disposal is closely tied to risk management. Residual values, ageing stock and cashflow all influence when and how vehicles are sold.
If a pence-per-mile structure introduces uncertainty around final liability, that risk may start to factor into disposal timing decisions. Operators may look more closely at when to release stock, how to price vehicles for disposal and how to protect margin in a changing tax environment.
Digital auction platforms offer transparency and speed, but they do not remove the need for accurate and consistent mileage accountability.
Telematics and connected vehicle data could support real time mileage tracking, making reconciliation smoother and reducing disputes. In theory, this would support both operational efficiency and accurate charging.
However, technology brings its own considerations. Investment, data ownership and customer acceptance all need to be assessed. For smaller fleets in particular, any additional system needs to demonstrate clear commercial value rather than simply meeting regulatory demand.
The proposed EV pence-per-mile model is not just a tax adjustment. It has the potential to influence systems, accountability and fleet vehicle disposal processes, particularly within the small fleet and rental space.
Execution will determine whether it strengthens the ecosystem or creates friction within it.
For those running owner managed or smaller fleet operations, it may be worth considering now how resilient current fleet disposal and vehicle disposal processes would be if mileage-based charging becomes a reality.
Dealer Auction - Fleet Remarketing Services
Contact Rachel at [email protected].
