Driving a van as your company vehicle has tax advantages over a car. The tax charge is generally low compared with a car, and can even be zero in circumstances where a car would be taxable. What conditions must you satisfy to eliminate a van benefit in kind tax charge?
The tax charge and regulations cover the van benefit in kind are governed by the Income Tax (Earnings and Pensions) Act 2003. Section 154 of the ITEPA 2003 explains the private use definition
Where an employer makes a van available for the private use (other than just taking the van home overnight) of an employee (or of a member of their family or household, a taxable benefit arises.
However, the use of a pool van is not taxable, if the conditions below are satisfied.
A benefit not provided by the employer is still taxable if it is provided by reason of the employment. For example, a car provided to a professional footballer by a car dealer would typically be a taxable benefit.
A benefit may also arise where a payment is made to a member of an employee’s family or household by reason of the employment. “Family” is defined as the employee’s spouse, parents and children (and their spouses) and dependants. “Household” has the same definition but also includes servants and invited guests.
A van is defined as any mechanically propelled road vehicle (not exceeding 3,500 kg fully laden) which is primarily suited to the conveyance of goods of any description.
An employee who uses a pool van (one provided for mainly business purposes but which the employee is permitted to take home overnight) will not be taxed on a benefit provided:
If private use is unrestricted, however, there will be a benefit (even where the employee makes a contribution to the costs). HMRC is unlikely to accept that a van is only used for commuting unless the employee has another vehicle available for private use, such as a spouse’s vehicle.
In contrast, examples of significant use would be taking the van to the supermarket every week, taking the van on holiday, or using the van for other social activities outside work.
HMRC has suggested that an employer should be able to demonstrate that business mileage is reasonable for the type of occupation involved.
A company van will not trigger a benefit in kind if the provision meets the “restricted private use” condition. This means that the employee can only drive the van on business purposes, but crucially ordinary commuting between the home and workplace also counts as business travel . This is confirmed by the HMRC Employment Income Manual. This means that providing a company van is far better than the position for a car, where any commuting would cause any claim that the car is only used for business travel to fail. In order for this condition to be met, any significant private use must be prohibited.
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