Company Van Tax

danoid

Hello, I'm a little confused about BIK for Vans with fuel cards.  As far as I can tell people who have company vans pay zero tax when a company provides a van and fuel card so long as you do not do significant private use miles, is this correct?

It's seem a little crazy to not pay any tax as it makes me wonder why do people have company cars when they can have a van for free?

Grumpy_chap

danoid said:

Hello, I'm a little confused about BIK for Vans with fuel cards.  As far as I can tell people who have company vans pay zero tax when a company provides a van and fuel card so long as you do not do significant private use miles, is this correct?

It's seem a little crazy to not pay any tax as it makes me wonder why do people have company cars when they can have a van for free?

This information seems fairly straightforward:
https://www.gov.uk/expenses-and-benefits-company-vans/work-out-the-value

According to that, BIK on £3,500 for the van plus £669 for the fuel.

The "zero tax" as you refer to is only if the van is exempt:
https://www.gov.uk/expenses-and-benefits-company-vans/whats-exempt

That really means the van is not available for private use, including attending a "regular" work place.  The "insignificant" private use is also covered in there, and it really is insignificant, the example given being stopping for a newspaper on a work journey.

Hope that helps.

danoid

Grumpy_chap said:

danoid said:

Hello, I'm a little confused about BIK for Vans with fuel cards.  As far as I can tell people who have company vans pay zero tax when a company provides a van and fuel card so long as you do not do significant private use miles, is this correct?

It's seem a little crazy to not pay any tax as it makes me wonder why do people have company cars when they can have a van for free?

This information seems fairly straightforward:
https://www.gov.uk/expenses-and-benefits-company-vans/work-out-the-value

According to that, BIK on £3,500 for the van plus £669 for the fuel.

The "zero tax" as you refer to is only if the van is exempt:
https://www.gov.uk/expenses-and-benefits-company-vans/whats-exempt

That really means the van is not available for private use, including attending a "regular" work place.  The "insignificant" private use is also covered in there, and it really is insignificant, the example given being stopping for a newspaper on a work journey.

Hope that helps.

If i'm allowed to take the van home and my work starts at home, then that is still exempt correct? I assume it is as it's considered a business trip

Jeremy535897

The only vans that are exempt from a benefit in kind charge are those that are either only used for business journeys (ignoring insignificant incidental use) or pool vans. You originally asked why more employees don't have vans. The issue is employees want exclusive use of a vehicle they can keep overnight at home and which they can use for commuting and other private journeys. A van used in this way will be subject to a benefit in kind charge, although it is likely to be more modest than the charge for a car.

To avoid a benefit in kind charge on a van, you can't keep it at home, even if it is a pool van, on a regular basis. 

danoid

Jeremy535897 said:

The only vans that are exempt from a benefit in kind charge are those that are either only used for business journeys (ignoring insignificant incidental use) or pool vans. You originally asked why more employees don't have vans. The issue is employees want exclusive use of a vehicle they can keep overnight at home and which they can use for commuting and other private journeys. A van used in this way will be subject to a benefit in kind charge, although it is likely to be more modest than the charge for a car.

To avoid a benefit in kind charge on a van, you can't keep it at home, even if it is a pool van, on a regular basis. 

That makes sense, but I guess this statement below is incorrect then?

Simon Wroe, Sales & Marketing Director at Leasing Broker Federation member Lease4Less Vans, has this advice: 

“There are some common misconceptions about company van tax with UK businesses as benefit in kind tax rules are so different to cars.

“What many businesses don’t realise is that the HMRC doesn’t count the commute – the drive between home and work – as private mileage, like they do with cars.

“This means that if a company van driver only uses the van for the commute and daily business, and they do not use it for personal use, they don’t actually have to pay van tax at all.

“However, if your company van is a pick-up or similar vehicle that you intend to use for private mileage as well as business use, you will still be liable to pay benefit in kind tax according to your tax rate of 20% or 40%.”

HMRC allows some ‘insignificant’ private mileage in addition to the commute to and from work. For example, if you make a detour to pick up a newspaper and a cup of tea or coffe.

But if you keep on using the van to go to the supermarket, that is not.

In all eventualities, it’s a good idea to keep a record of your private mileage.

Jeremy535897

There is a limited exception for commuting (from https://library.croneri.co.uk/cch_uk/btr/416-264 ):

"Steve works as a plumber. He is provided with a van which is kept full of tools and plumbing accessories. His work involves visits to private houses. His routine varies and on some mornings he goes direct to his first job but on others he has to go first to the employer’s depot to pick up supplies. He is allowed to take the van home at the end of each day but is strictly forbidden to make any other private use. The insurance of the van reflects these conditions.

Steve meets the restricted private use condition as the van is made available mainly for business purposes and the only permitted private use is for ordinary commuting. His taxable benefit is therefore nil (and he will not incur a fuel scale charge for any year, even if his employer pays for all fuel for the van)"

But the van has to be used mostly for business (not commuting), which is why you can't just swap a van for a car:

"Jack is director of a company that imports fruit and vegetables. He works almost entirely from the warehouse. Jack has a luxury car at home but on advice from his accountant he uses an (expensive) van for commuting to and from work, a round trip of 40 miles. The company pays for all expenses, including fuel. Nobody else drives the van. Jack tells his accountant that he almost never uses the van for purposes other than commuting to and from work.

Jack will pay tax on a benefit of £3,350 (for 2018-19). A fuel scale charge of £633 will also apply. The fact that Jack may make occasional private use of the van for other purposes is not the main problem – other private use is not fatal as long as it is insignificant. However, it is clear on these facts that the van is not being made available mainly for the purposes of business travel. It therefore fails the second leg of the restricted private use condition. It also appears on these facts that there may be no formal restriction in place to prevent other private use."

danoid

I see now I believe, my circumstance would be the same as "Steve" so therefore nil tax, as the job does not have an office location as such so involves going mulitple places

Grumpy_chap

danoid said:

I see now I believe, my circumstance would be the same as "Steve" so therefore nil tax, as the job does not have an office location as such so involves going mulitple places

Are you self-employed (either sole-trader or Ltd Co Director)?

This assessment is usually undertaken by the employer, who has to ensure that the "no private use" is reflective of reality.  Various approaches can be used on this, including contract of employment, written declaration, trackers etc.  If the employer is not satisfied that the criteria are met, then they will declare the value of the van on the P11D.  You would need to ask the employer how the van will be treated for tax.

If you are employed, then you have limited scope to challenge the employer's assessment.

If you are self-employed, then you do the assessment and have to put the criteria down yourself and establishing the "no private use" is more difficult.

lolamancity

I can answer this from a non professional but living proof POV! 

My partner has a company van and fuel benefit. It is a long standing arrangement with employees that his company are now desperate for employees to give up - they want everyone to have company vans for business use only, no private mileage - the van travels to places of work, comes back to a home address each evening and doesn't move again until employment hours resume.

 The fuel aspect of using the vans for private mileage is the main reason why most employees won't give this up. My partner uses his van outside of work hours as if it was our second car, we go on long mileage UK holidays with it, it's great. However - it isn't free, and it's now starting to become a burden rather than a privilege! Last tax year he paid 4k for use of the van, which hasn't been a problem until the last few years where his (variable) wage has now reached 40% tax territory. The main issue is child benefit. The minute one parent hits 50k earnings, they start paying child benefit back even if it's the other person who receives it. In our case, we are a single income household, my earnings are mainly carers allowance and child benefit. The problem now is that his earnings include the van/fuel benefit added on top. At 4k, this usually takes it over the 50k threshold for the child benefit claw back, and as a result triggers self assessment and for the last 3 years has left him with a seemingly ever-changing "X" tax code where his variable income is getting taxed to actual death each month. There's vague hefty charges on his tax notice letter than make no sense and every time he queries it, he comes away with no answers! This is the problem with a variable income, exasperated by receiving a van/fuel benefit, but then turned into a quagmire by any kind of allowances a person might claim for (child benefit, marriage allowance etc). Imo the van/fuel benefit is a curse not a blessing! 

KingOfSnake

OK, first point, don't take tax advice from a sales and marketing Director - they may possibly have other motives. I don't give out sales and marketing advice because I have no idea about it.
This is actually quite complicated on quite a few levels. 
1. Is your van a van? Double cab pick-ups with a payload of below 1 tonne (1,000kg) are not treated as vans for employment taxes purposes - but 'cars'. The legislation is quite complex, but trust me.
2. Is it a VW Kombi or Vauxhall Vivaro crew-cab? If so, they (and others will follow) are subject to some really interesting Court proceedings about what is a van and what isn't (google search "coca-cola v HMRC vans"). I think it is going to the Supreme Court and really interesting for us tax geeks. 
3. Assuming it is a genuine van:
3a. If you only ever use it for home to client/ customer/ sites and back home and you do not spend 40% of your time at a single site over a rolling 24 month period, then it is exempt (both the van BIK and the van fuel BIK).
3b. If you do use it for home to client/ customer/ sites and the other business use of the van exceeds this mileage, then it is also exempt (van BIK and van fuel BIK). 
3c. If you use the van for home to site (less than 40% over 24 months) and only use for minor (a.k.a. incidental) private use (see HMRC for the non-statutory and non-binding examples) then it will be exempt. However, if your other private use is not minor (holidays etc) then it is taxable and the van and van fuel (assuming fuel is on a fuel card) is taxable. 
3d. If they don't apply, the van and van fuel BIK arises - you'll pay tax at 20% (basic), 40% (higher) or 45% (additional)* rates - so, quite often, paying tax at these rates is a HUGE amount better than company cars and car fuel. 

So, if you only ever use the van for home to client/ customer/ site and none of these sites are over 40% of the time over a rolling 24 month period  and  you do not otherwise use it privately, even if it is kept at home the benefit is exempt. 

*higher rates apply for any Scottish resident taxpayers!