Motorists could be prosecuted and have their car insurance policy invalidated by simply asking friends for petrol or diesel money this summer. Designated drivers who ask their passengers to contribute to fuel costs could be caught out if they accidentally turn a profit.
According to MoneySuperMarket, there are strict rules around profit-making without the right agreements in place, which would be a major blow to road users. Although cost-sharing is legally allowed, accidentally making a profit is a big ‘no-no’ and will have serious consequences. They warn that even a “small mark-up” could see motorists fall into the “hire and reward” category, possibly leading to prosecution.
Alicia Hempsted, car insurance expert at MoneySuperMarket said: “It might seem harmless to ask a mate for £10 when the fuel only cost you £5, but insurers may view that as profit. That small mark-up could shift you into the ‘hire and reward’ category, which entails transporting people for money, which isn’t covered by most personal car insurance policies.
“If you’re in an accident under these conditions, your insurer could reject your claim or even cancel your policy entirely. That’s not just costly – it could lead to fines or prosecution for driving without insurance.
“There’s a clear line between sharing costs and making a profit. HMRC and the Association of British Insurers both acknowledge that genuine cost-sharing is allowed. But the moment you start earning, even a small amount, it could be viewed as commercial activity.”
According to experts, several behaviours could raise red flags with insurers in a major blow to road users.
Regularly offering lifts to people outside a household in exchange for money is risky, while charging road users more than the actual cost of fuel is likely to be risky.
However, advertising lift availability on social media or online forums could be interpreted by insurers as offering a paid service.
Alicia added: “Only ever ask passengers to cover what the trip actually costs you in fuel and vehicle running costs, a fair way to work this out is by using the HMRC mileage rate (currently 45p per mile), which covers both fuel and everyday wear and tear like servicing, insurance, and tyres.
“Avoid making any kind of profit – that’s what can turn a friendly lift into a commercial transaction in the eyes of insurers. You can use our fuel cost calculator tool to check the cost of petrol used.”
