If an employee is able to use a work’s van for private use, which generally includes home-to-work travel, there will be a taxable benefit and a subsequent tax charge.
From 6 April 2019, the flat-rate van benefit charge has risen from £3,350 to £3,430, representing a small increase in real terms to a basic rate taxpayer of £16 a year.
If an employer also provides the employee with fuel for private use, then a tax charge on the provision of fuel will also arise based on an annual fixed rate. For 2019/20 the flat-rate van fuel benefit charge has been increased from £633 to £655, so there is an increase in real terms to a basic rate taxpayer of just £4.40.
What is a van?
To qualify as a van, a vehicle must be:
The design weight of a vehicle, also known as the ‘manufacturer’s plated weight’, is normally shown on a plate attached to the vehicle. What it means is the maximum weight which the vehicle is designed or adapted not to exceed when in normal use and travelling on the road laden.
Human beings are not ‘goods or burden of any description’ so a vehicle designed to carry people (such as a minibus) will not be a van for these purposes.
A charge to income tax will generally arise if a company van is made available, by reason of the employment, to an employee or to a member of his or her family or household for private non-business-related use. It must be made available without a transfer of ownership from the employer to the employee.
There are three types of journeys that are classed as non-taxable business use:
Broadly, vans used as pool vans that meet the following criteria will not attract a benefit-in-kind tax charge:
Given that these rules provide a total exemption from any tax charge, it is not surprising that HMRC apply them very strictly.
The benefit charge applies regardless of the employee’s earnings rate but may be proportionately reduced if the van is only available for part of a tax year, and/or by any payments made by the employee for private use.
For 2019/20, a basic rate taxpayer will pay £686 for the use of a work’s van (£3,430 x 20%). For a higher rate taxpayer, the cost will be £1,372.
If fuel is also provided for private use, for 2019/20, a basic rate taxpayer will additional tax of £131 (£655 x 20%), and a higher rate taxpayer will pay £262.
Tax is normally collected through the employee’s Pay As You Earn (PAYE) tax code.
Partner Note: ITEPA 203, ss 154-159; FA 2016, s 11; EIM22701ff
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