October 29th, 2012 / Insight posted in

Taxing times for a company van

SJ writes: I am thinking of having my company provide me with a van, which I would drive occasionally on company business. I understand that the tax on a van used to be low compared to a company-car tax, but this may be changing. Is there a way round this, or should I restrict the use of the van to business only to avoid a high tax charge?

There is a planned increase in income tax on company vans from April 5, 2007, writes Jon Sutcliffe, partner at Kingston Smith LLP.

The calculation of taxable benefit of being provided with a van or a car for private use will be different.

The car benefit is calculated as a proportion of its original list price and the proportion increases for higher-emission cars. The taxable benefit for a van is a fixed amount, which is reduced once the vehicle becomes four years old.

The tax increases are from the current £500 to £3,000 in 2007-08. There will also be an annual flat-rate charge of £500 for being provided with fuel for private use of the van. There will be no discount for older vans.

Your question implies that you will have private use, so you will be taxed at these higher rates from April 2007.

First check if there is actually a taxable benefit. This depends on whether the van is used mainly for business and that any private use is insignificant.

Private use includes travel from home to work, and anything other than very occasional weekend use.

There are reductions from the standard charge if the van is shared with another employee, or if it is unavailable for a period.

In practice, if you claim the van’s private use is insignificant, be prepared to keep detailed mileage records for it and make suitable amendments to the driver’s employment contract on van use.