If an employee uses the company van, will a van benefit apply?
We all know that company car tax rarely makes it tax efficient to run a company car, but what about a company van? Are the rules the same?
Let’s start with the basics. If a van is made available to an employee for personal use then a benefit in kind charge applies. Unlike with company cars, this is not based on list price and Co2 emissions, but is a flat rate amount. For the current 2017/18 tax year the benefit in kind charge is £3,230, and this will increase to £3,350 in 2018/19.
Similarly to company cars, if the employee is also provided with fuel for their personal journeys then a fuel benefit will also apply. This is also a flat rate amount of £610 for 2017/18, increasing to £633 in 2018/19.
The employee will face personal tax on these benefits in kind (which are reported to HMRC on form P11D), while the company has to pay 13.8% Class 1A National Insurance on the benefits.
However, there are some subtle differences between the rules for a company car and a company van, the most useful of which concerns restricted private use. For a company van, any journeys made to and from the normal workplace (i.e., ordinary commuting) are classed as business journeys. Those journeys do not therefore trigger the van benefit.
In addition, if any private mileage over and above ordinary commuting is ‘insignificant’ then no van benefit charge will be triggered. This therefore allows the occasional private trip to be made in the van without triggering a taxable benefit, providing such trips are rare and irregular.
To reinforce the restricted private use conditions, it is usually advisable to have a company van usage policy which all affected employees sign that states that the company van isn’t to be used for any private journeys, except where they are insignificant.
With such a policy in place, if any employee does use a company van for more personal trips than intended, then this would generally become an employment law matter, rather than a tax one, and the van benefit charge will not usually be invoked.
Key Facts
- If an employee is allowed to use the company van for personal use a tax benefit arises
- The company van benefit is a flat rate charge of £3,230 (for 2017/18)
- A separate van fuel benefit applies if all fuel is paid for of £610 (for 2017/18)
- Ordinary commuting to and from work is not classed as personal use for a van
- Restricting private use to just occasional trips will usually avoid the tax charge
For further advice on this matter please contact me.
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