Telephone: 01270 899112

If you manage a business with trades people, engineers or delivery drivers it can be common place to provide your employees with a company van. This can cause complications when it comes to tax as company vans can potentially be classed as a benefit in kind. We’ve broken down what you need to know to simplify company vans.

Is There A Benefit In Kind?

Company vans used purely for work use and not used for ordinary commuting.

  • Not considered a benefit in kind.
  • Nothing to report.
  • No tax implications.

Company pool van used purely for work use and not used for ordinary commuting.

  • Not considered a benefit in kind.
  • Nothing to report.
  • No tax implications.

 

Company van used for both work and personal use such as commuting to your ordinary place of work or personal use outside of work journeys.

  • Classed as a benefit in kind.
  • Needs to be reported via a P11D.
  • The value to be reported includes the Van Benefit Charge (VBN) and the Fuel benefit charge.

Company van used for both work and personal use, but employee is charged for mileage on personal journeys.

  • Classed as a benefit in kind.
  • Needs to be reported via a P11D.
  • The value to be reported includes the Van Benefit Charge (VBN).
  • There is no fuel benefit charge as the employee has reimbursed the employer for fuel costs.
How Much Is The Benefit In Kind?

The Company Van Benefit value is currently £3430 per year. Zero emission vans will be valued at 80% of this for the 2020-21 tax year. There is draft legislation proposing to drop this to £nil for the 2021-22 tax year on zero emission vans.

The fuel benefit charge is currently £655 per year.

How Much Will Employers and Employees Pay?

Employers will pay class 1A National Insurance – this is 13.8% of the value of the benefit in kind.

Employees will pay tax on the value of the benefit in kind. This will vary depending on which rate of tax payer they are (20%, 40% or 45%).

Our Top Tips
  • Consider zero emission vans to reduce the benefit in kind liability
  • Implement a clear and detailed private usage policy to avoid incurring fuel benefit charges
  • Company vans do not need to be reported until the end of the tax year on a P11D (unlike company cars which are reported via a P46(car)). This means a significant tax bill can accumulate for your employee. Advice employees to contact HMRC as soon as they are provided with a company van used for personal use so that they can have their tax code adjusted accordingly.