Van tax rates
In his Autumn Budget 2017 the Chancellor announced an increase in the taxable benefit in kind for employees (including directors) who have a van provided by their employer which they can use for private journeys. The flat rate taxable amount for 2018/19 will be £3,350 (it’s £3,230 for 2017/18) and where the employer also meets the cost of fuel for private journeys, the fuel benefit will be £633 (it’s £610 for 2017/18).
How much tax and NI?
A higher rate taxpayer provided with a van and fuel for private journeys for the whole of 2018/19 would pay tax of £1,593 ((£3,350 + £633) x 40%). The employer would pay Class 1A NI of £550 ((£3,350 + £633) x 13.8%). However, unlike company cars, vans can be used for some private journeys without any tax or Class 1A NI liability at all.
Tip. Where the “restricted private use” condition is met, no tax charge arises for use of the van or the provision of fuel by the employer.
What is “restricted private use”?
The restricted private use condition is that the employer only permits an employee to drive the van for business purposes. However, unlike the position for company cars and mileage allowances paid for journeys in an employee’s own car, ordinary commuting (travel between home and a normal place of work) counts as a business journey for the purpose of the van benefit.
Tip. Whether or not the restricted private use condition is met, the private use of a van doesn’t trigger a tax charge where the private mileage is “insignificant”.
What counts as insignificant?
The legislation doesn’t give any hints as to how much “insignificant” is, but HMRC’s view is that private use is:
- not for more than a few days at most over the whole tax year
- not for a number of consecutive days. Two or three would be OK, but probably not more
- is intermittent and irregular
- the exception in terms of the pattern of use.
HMRC also gives examples of the type of use that it considers insignificant and that which it doesn’t.
Creating the right conditions
In practice how a van is actually used is difficult for HMRC to check with any accuracy. Nevertheless, you should take a reasonable approach and stick as closely as possible to HMRC’s guidelines.
Tip. If you want to make use of the restricted private use exemption (so that the van can be used by one or more employees for ordinary commuting without there being a taxable benefit in kind), you should, in your role as the employer, express clearly in a written policy that the van isn’t to be used for private journeys except where they are insignificant