Background

Over the last few years a number of changes have been made to the company van tax regime.

These changes were introduced in April 2005 and April 2007.

The changes mean there will be no taxable benefit where employees have to take their company vans home and are not allowed any other private use.

HM Revenue and Customs (HMRC) introduced this new system to ensure company van tax is fairer and equitable and will address the abuse that has arisen with the use of double cab pick vans.

Unrestricted Private Use

In 2005 a standard tax charge became payable where a company van is made available to an employee for unrestricted private use. The scale charge for unrestricted private use is £3,000.

Basic rate tax-payers who choose to have unlimited private use of their vehicles will pay 22% of £3,000, equivalent to £660 benefit in kind taxation from 2007. These changes do not apply to self employed van drivers where special exemption rules apply.

In addition, the employer must pay 12.8% National Insurance on the benefit. There is no tax payable by the employee or employer if private use by an employee is restricted.

From April 2010 if a zero emitting van is provided then the scale charge is reduced to nil.

Nil Charge

Under the changes it is expected that a large number of company vans will no longer incur a tax charge for both the employer and employee.

This will only be applicable if the following are satisfied:-

- the only journeys made in the van are work journeys, eg. delivering goods or making calls to customers

or

- all the journeys are work journeys and travelling between home and work only

However, if the van is used for private use to an insignificant degree – such as taking an old mattress or other rubbish to the tip once or twice a year) then no tax would have to be paid.

The employer must be able to show HMRC that no tax is payable. It is recommended that this is demonstrated by keeping the following:

- mileage records

- signed agreement about the van use

- make the use of the van part of the contract of employment.

Employer Provided Fuel

If the employer provides fuel for private use there is an additional charge of £550, regardless of the amount of fuel provided. The employer will have to pay class 1A national insurance contributions to ensure the fuel is treated as a benefit.

Reduced Charge

Under the regime, the standard tax charge may be reduced if the company van:

- is unavailable (excluded)

- is shared

- the employee makes payments in respect of its private use.

Record Keeping for Private Use

To enable an employer to report the benefit for an employee who has had private use of a shared van, the employer will need to identify:

- The total number of vans which have been shared in the year

- The age of each shared van

- Periods of 30 or more consecutive days when a shared van was incapable of use

- Periods before the date on which a van became a shared van or after it ceased to be one

- Periods of 30 or more days when a shared van was available for the exclusive use of one employee

Definitions

Van

A vehicle of a construction primarily suited for the conveyance of goods or burden of any description (this does not include people) with a design weight (which the vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden) not exceeding 3,500 kilograms. A vehicle is considered as a van if it can carry payloads up of one tonne or more. This would include double cab pick-ups.

Restricted Use

The restricted use condition is met if:

- The terms on which the van is made available to the employee prohibit its use otherwise than for the purposes of ordinary commuting or travel between two places that is for practical purposes

- Neither the employee nor a member of their family or household makes private use of the van other than for those purposes

- The van is available to the employee mainly for use for the purposes of the employee’s business travel

Private Use

Any use other than for the employee’s business travel.

Shared Van

A van is a shared van for a period if either it is available:

- Concurrently for the private use of more than one employee of the same employer throughout that period, or:

- Throughout the period to different employees of the same employer at the different times (excluding periods of 30 days or more during which the van is available to one employee only).

Excluded Days

A day on which the van is unavailable or is a shared van or falling within a period of 30 or more consecutive days when the van was incapable of being used at all.

Useful websites

The below website may be helpful for further information and guidance.

HM Revenue and Customs; www.hmrc.gov.uk

If you require more information or help on this just click here,www.vanlease.net

Every effort is made to ensure that the content of this fact sheet is accurate. However the BVRLA cannot accept any liability whatsoever for any inaccuracy contained within it and accept no liability whatsoever for any damage or loss, direct or indirect, which may be suffered as a result of any reliance placed upon the information provided whether arising in contract, tort or in any other way. The purpose of this fact sheet is to provide general guidance and information only. Advice should always be obtained from your own professional advisers before committing to a specific action.