company van tax

Murphy_The_Cat

Bean_Counter wrote: »

It looks we are having a visit from the PAYE bods in the next few weeks, so we will find out then!

Good luck. It is not an experience that I would wish on anybody that I like - and we run a tight ship !

Pennywise

You can use a company van for "insignificant" private use and still not trigger the benefit in kind charge - see the HMRC website:-

Meaning of insignificant private use

The word ‘insignificant’ is not defined, so it takes its normal English meaning. For example, the New Oxford English Dictionary defines it as, “too small or unimportant to be worth consideration”.

Private use is to be considered insignificant if it is:

• insignificant in quantity in the tax year as a whole (i.e. a few days at most)
• insignificant in quality (e.g. a week’s exclusive private use is clearly not insignificant)
• intermittent and irregular
• very much the exception in terms of the pattern of use of that van by that employee (or their family or household) in that tax year
• insignificant in absolute terms, not merely as a proportion of other use.

http://www.hmrc.gov.uk/manuals/eimanual/EIM22745.htm

Murphy_The_Cat

Pennywise wrote: »

Private use is to be considered insignificant if it is:

• insignificant in quantity in the tax year as a whole (i.e. a few days at most)
• insignificant in quality (e.g. a week’s exclusive private use is clearly not insignificant)
• intermittent and irregular
• very much the exception in terms of the pattern of use of that van by that employee (or their family or household) in that tax year
• insignificant in absolute terms, not merely as a proportion of other use.

http://www.hmrc.gov.uk/manuals/eimanual/EIM22745.htm

& that is where it CAN get very messy - when you start to disagree with the Inspectors as to what is and isn't insignificent. If my recent HMRC Compliance Visit is anything to go by, prepare yourself for some 'robust' questions from the Inspector -- questions that rapidly become quite hostile if he/she can even sniff a hint of manipulation :eek:

stphnstevey

I guess here we are considering the benefit of a comapany car or van vs using your own car

For me, 40p a mile is very attractive and after the cost of petrol makes me £4,500 yr. Minus £900 running costs, I make about £3600 a year tax free.

Where as a company car/van, I would pay at benefit tax of at least £600. But the company can claim back the VAT, I can offset it and the running costs as a cost to the the business.

I haven't done the figures for the company car/van yet

---

This is what I have managed to gleam about 'insignificant' use:

• Private use is limited to ordinary commuting, or to ‘insignificant’ private use beyond ordinary commuting, and the van is available mainly for the employee’s business travel
• ‘Insignificant’ private use means that the employee’s private use of the van is very much an exception to normal usage, and only lasts for short periods on an occasional and irregular basis.
• For example insignificant is:
  • making a slight detour to buy a newspaper on the way to work counts as insignificant private use
  • takes an old mattress or other rubbish to the tip once or twice a year
  • regularly makes a slight detour to drop off a child at school or stops at a newsagent on the way to work
  • calls at the dentist on the way home.

Examples of use which is NOT insignificant

• uses the van to do the supermarket shopping each week
• takes the van away on a week’s holiday
• uses the van outside of work for social activities.
• an employee using a van to do their weekly shopping counts as more than insignificant private use

• As of April 2007, a flat reportable value of £3,000 applies to all company vans used for private use (beyond ordinary commuting and insignificant private use, for which there is nothing to report as explained in the previous section). Note, this is £3,000 x normal tax rate (a 20% tax payer will pay £600 whilst a 40% tax payer will pay £1,200)
• The £3,000 figure can be reduced if you receive payments from your employee for their private use of the van
• There is a flat reportable value of £500 if you provide fuel for private use in a van that is subject to the £3,000 charge - Note that this £500 figure is reduced to nil if in the year the employee makes good the cost of all fuel provided for private use (including fuel provided for commuting) Note, this is £500 x normal tax rate (a 20% tax payer is £100 and £200 for a 40% tax payer)

Bean_Counter

stphnstevey wrote: »

This is what I have managed to gleam about 'insignificant' use:

• Private use is limited to ordinary commuting, or to ‘insignificant’ private use beyond ordinary commuting, and the van is available mainly for the employee’s business travel
• ‘Insignificant’ private use means that the employee’s private use of the van is very much an exception to normal usage, and only lasts for short periods on an occasional and irregular basis.
• For example insignificant is:
  • making a slight detour to buy a newspaper on the way to work counts as insignificant private use
  • takes an old mattress or other rubbish to the tip once or twice a year
  • regularly makes a slight detour to drop off a child at school or stops at a newsagent on the way to work
  • calls at the dentist on the way home.

Examples of use which is NOT insignificant

• uses the van to do the supermarket shopping each week
• takes the van away on a week’s holiday
• uses the van outside of work for social activities.
• an employee using a van to do their weekly shopping counts as more than insignificant private use

This is exactly my understanding of private use as well.

Murphy_The_Cat

stphnstevey wrote: »

I guess here we are considering the benefit of a comapany car or van vs using your own car

For me, 40p a mile is very attractive and after the cost of petrol makes me £4,500 yr. Minus £900 running costs, I make about £3600 a year tax free.

Don't forget that you have to buy, service, tax, insure and absorb the depreciation of your own car - is the 40p per mile for the first 10000 miles still attractive ?

Also, and this goes for Bean Counter as well -- your mileage records that differentiate between 'private' mileage and 'business' mileage need to be bang up to date and if at all possible have supporting evidence of what the mileage was used for. Without these, you run the risk of the Inspector rejecting your mileage claims.

stphnstevey

Murphy_The_Cat wrote: »

Don't forget that you have to buy, service, tax, insure and absorb the depreciation of your own car - is the 40p per mile for the first 10000 miles still attractive ?

I know this will surprise you, but the £900 takes all that (except depreciation) into account. I only run a little car.

As for depreciation, the £3,600 more than pays cost of the car over 3yrs (told you it was only a little car!) with some profit and also at the end of 3yrs there is a residual value in the car of a couple thousand. So over 3yrs I make about a £5,000 profit!

david69_2

with reference to the company vans my neighbour uses his company van all the time for personal use and doing his cash in hand work 7 days a week.
when i asked him about it he said his boss says its ok but its not up to his boss surely.

real1314

stphnstevey wrote: »

I know this will surprise you, but the £900 takes all that (except depreciation) into account. I only run a little car.

As for depreciation, the £3,600 more than pays cost of the car over 3yrs (told you it was only a little car!) with some profit and also at the end of 3yrs there is a residual value in the car of a couple thousand. So over 3yrs I make about a £5,000 profit!

Erm, to get £4500 you'd have to do 12,000 miles (10k at 40p + 2k at 25p), the mpg figure to cover that for £900 at 90p per litre would have to be an average of 54.5mpg just to cover the petrol.

I did a fairly accurate depreciation calculation on a car I had written off 2 years ago; bought with 30k on the clock, written off with 90k on the clock, lost £3k in value over that period, amounting to 5p per mile, which is fairly low.
Add on a full set of tyres every 2.5 years, a new exhaust system every 50k, new clutch at 60k, new brake pads every 30k (?) Plus insurance will be higher for 12k miles + your priavte miles than it would be for private alone, and you should also apportion servicing and tax costs to the running costs. After doing that, there is no way at all you can run a car for 12,000 miles for £900.

I'm not saying you cannot run a car for less than 40p per mile, but you need to look properly at your calculations.

stphnstevey

real1314 wrote: »

Erm, to get £4500 you'd have to do 12,000 miles (10k at 40p + 2k at 25p), the mpg figure to cover that for £900 at 90p per litre would have to be an average of 54.5mpg just to cover the petrol..

WRONG - I do 20K. Also, that is AFTER the cost of the petrol is taken off.

430 Miles on full tank
£45 For full tank
£0.10Per mile

£0.30 Remaining from 40p mile
£0.15 Remaining from 25p mile

£2,953.49 1st 10,000 miles
£1,453.49 Next 10,000 miles

£4500 TOTAL mileage payment minus petrol

£150 Road Tax
£50 Tyres
£250 Maintenance
£200 Service
£250 Insurance
£900TOTAL running costs

£3,600TOTAL after costs

£10,800TOTAL after costs 3yrs

£7,000 Cost of vehicle
£4,000 Residual value of car

£7,800 TOTAL final profit 3yrs

real1314 wrote: »

I did a fairly accurate depreciation calculation on a car I had written off 2 years ago;.

You have to modify the calculation a little if your driving means your prone to writing them off.......

real1314 wrote: »

bought with 30k on the clock, written off with 90k on the clock, lost £3k in value over that period, amounting to 5p per mile, which is fairly low.
Add on a full set of tyres every 2.5 years, a new exhaust system every 50k, new clutch at 60k, new brake pads every 30k (?) Plus insurance will be higher for 12k miles + your priavte miles than it would be for private alone, and you should also apportion servicing and tax costs to the running costs. After doing that, there is no way at all you can run a car for 12,000 miles for £900.

I only run a car for 3 yrs (anything more due to my high mileage is unwise), so 90% of your costs are irrelevant to me.

real1314 wrote: »

I'm not saying you cannot run a car for less than 40p per mile, but you need to look properly at your calculations.

Actually you need to look carefully at what YOUR basing your calculation on before you start trying to rip other peoples to pieces.

Mine works fine for me, but thanks for your (in)competent analysis