It’s the commercial vehicle equivalent of company car tax and generally makes a significantly smaller dent on your net income, which is why some people will choose a double cab pick-up as their ‘company car’ – if permitted.
For the tax year 2017/18, the annual van benefit charge for a company provided van is £3,230. So if you pay tax as a standard rate 20% tax payer you will pay £646 a year, that’s equivalent to £53.83 a month.
If the company also pays for fuel used for private mileage, the driver is taxed on this, too. The annual tax liability for so-called ‘free’ fuel – the van fuel benefit charge – is £610. So a 20% income tax payer will be charged 20% of £610 for ‘free’ fuel, which is £122 per year. That’s in addition to the £646 company van tax, making a total of £768 a year or £64/month.
But the tax can be eye-wateringly different if the van’s a kombi – see below
These figures double if you are a 40% tax payer.
However, if the driver covers no private mileage in the van, he or she will not have to pay company van tax.
The taxman does not count driving the van between home and work as private mileage. So if you take the van home at night and do no other mileage, you do not have to pay company van tax.
The taxman allows some ‘insignificant’ private use, such as dropping a child off at school on the way to work. But if the van is regularly used to do the supermarket run, that is counted as private mileage.
An employer pays Class 1a National Insurance on taxable benefits.
The Revenue & Customs suggests that to avoid possible confusion, and tax liability, a mileage record is kept; an agreement is signed about van use and use of the van is put into a contract of employment.
We just wanted to let you know...
Company van tax is not applicable if the owner is a sole trader or partner.
What if the van is a kombi or crew van?
However the tax situation can change if the van is fitted with rear side windows and a second row of seats and used for private use too, as was highlighted in a recent court ruling.
The crux of the issue is a matter of vehicle use rather than simply its construction.
The argument stemmed from HMRC insisting that the vans Coca-Cola gave to their mobile engineers were actually cars. Given that the vehicles in question were the Vauxhall Vivaro and VW T5 Kombi it may seem HMRC missed a rational conclusion with all the tools and equipment, racking systems, storage units, and such like fitted to the vans not counting just because they had a second row of seats.
The case went to tribunal. According to the Judge’s ruling the Vivaro with extra seats was a van while the VW with extra seats was a car.
The case highlighted that there are two sets of HMRC guidelines as set out for some years: one concerns the load-carrying capability of the vehicle as used and the other how it is used.
If it is solely used for business it is a van, but if the kombi has private use it becomes classified as a car for benefit in kind purposes. Check out their guidelines.
An entry-level VW T6 Kombi classed as a car will have a P11D above £40,000, a BIK band of 35% in 2017/18 for a BIK value above £14,000 bringing an annual tax bill of £2,825, with fuel benefit tax adding £1,582 giving an annual bill of £4,407 or £367.25 per month for a 20% taxpayer.
However even if it is classified as a car for BIK purposes, check it out on our company car tax calculator, it is still a van when it comes to road tax (so there is no CO2 weighting – yet – and fortunately there is no £350 a year extra premium for years 2-6 if it costs over £40,000, as now applies to cars).
What about company van tax and electric vans?
If you drive a zero emission electric van then the amount of company van tax is reduced. Currently it is 20% of the standard van benefit charge rate (ie 20% of £3230, which is £646, which will cost £129.20 a year at 20% tax rate).
The relief, which is tapered, was due to increase to 40% of the standard van benefit charge in 2016/17; but this has not happened, and it remains at 20% of the standard charge.
- Before you make any decisions on changing your tax status, it is best to seek independent taxation advice, such as from an accountant.