This article will cover van benefits in kind (BIK) for employees and directors.
HMRC offers a range of tax options which are dependent on how a van is used by a business.
- If a van is used solely for business journeys or as a pool van, you do not have to report or pay anything. It is seen as having no discernible ‘Benefit in Kind’ (BIK). HMRC specify that ‘insignificant’ private journeys are also exempt, for example, making a slight detour to pick up a newspaper on the way to work.
- If a van is used beyond work for private journeys in the evening or at the weekends, a taxable BIK then arises and costs must be reported (as is the case where a van and/or fuel form part of a salary sacrifice arrangement).
What is the taxable van benefit?
The taxable van benefit for the current fiscal year 2022/23 is £3,600 (max). If the employer provides fuel for the van which will be used by the employee on a private basis, this would mean that an additional van fuel benefit of £688 (max) would be taxable on the employee for 2022/23.
What does HMRC consider to be a van?
Making sure that the classification of the vehicle is accurate is really important. Even though you or your business might consider it to be a van, HRMC could rule that it falls under the ‘car’ classification. In order to create some consistency, the following definition of a van has been published:
“A goods vehicle primarily constructed for delivering goods and has a fully laden gross weight of 3.5 tonnes or less, and which is not a motor cycle.”
By way of an example, consider the Nissan e-NV200
It is a multipurpose vehicle which has been described as a ‘people carrier’ and is equally suitable for carrying goods as it is passengers. It is not a goods vehicle and for the purposes of BIK, HMRC consider it to be a car.
Is a double cab pick up considered to be a van or car for tax purposes?
A common question is whether an employee who is provided with a double cab pick up for both business and private use, will be taxed as a van or car benefit. For example, is a Toyota Hilux Invincible (a double cab vehicle) a van or car for BIK tax purposes?
The definition of a van for BIK purposes follows the same definition given for VAT; it must be considered whether there is a ‘payload’ of at least one tonne. ‘Payload’ refers to the difference between a vehicle’s maximum gross weight and its kerbside weight.
In the case of the Toyota Hilux Invincible, it is believed that it does have a payload of a least one tonne. Based on HMRC VAT Manual VIT56600, it is deemed that vehicles that have a payload of one tonne of more are to be treated as vans, not cars.
It is important to find out from the manufacturer/retailer the payload of any double cab vehicle you buy, as by adding accessories to the ex-works model it may – by lowering the payload of the vehicle – convert it into a car for tax purposes (e.g., the payload is the difference between the vehicle’s maximum gross weight and its kerbside weigh, so if a hardtop is added (which is accorded a generic weight of 45kg) the kerbside weight will increase and the payload decrease).
Do you have to pay tax on electric company vans?
No, in the 2020 budget, the BIK rate for employees and directors for pure electric vans was reduced to zero. That covers vans which are used for both business and private use. However, there is still a need to report a zero-emission van on form P11D at 0%.
It is definitely worth considering this tax saving opportunity. Essentially, employers can provide electric vans to their employees to use for business during the day and also allow unlimited private mileage and use of the vehicle in the evenings and the weekends. In doing this, employers also save money on National Insurance, as there is no Class 1A NIC required to be paid. For employees, electric vans save money in terms of road tax which is currently zero and a percentage of an electricity bill can be claimed back as a business expense if the van is charged from home. There is also no fuel benefit if the van is charged at the workplace each day or the employee is given an electric charge card.
What is the super-deduction tax relief on company vans?
Up until 31 March 2023, companies investing in ‘new and unused’ vans and commercial vehicles may be able to claim a 130% super-deduction capital allowance (subject to the super-deduction criteria being met). So a company incurring £60,000 of qualifying expenditure would mean the company can deduct £78,000 (130% of the initial investment) in calculating its taxable profits. Deducting £78,000 from taxable profits will save the company up to 19% of that – or £14,840 – on its corporation tax bill.
If you would like to find out more about company vans and the savings you could make, please contact our Senior Tax Manager, Vanessa Glenn.
Email: [email protected]
Phone: 02476 309029