A company van is a useful asset for many businesses, but depending on how it is used, the employee using the van may need to pay what Her Majesty’s Revenue and Customs (HMRC) refers to as a ‘Benefit in Kind’ tax.
If the company van is used mainly for work and for insignificant private purposes, there is no requirement to report to HMRC because there will be no tax to pay on the use of the van. This is also the case if the van is used as a pool van, which is where more than one employee uses the van and it is not usually kept at an employee’s home.
If, however, the van is used for personal purposes beyond what HMRC regard as insignificant private use, then you will need to report to HMRC and the employee will be liable to pay a Benefit in Kind tax. Tax will also be due on the fuel used for private journeys.
HMRC have made it clear that private usage of a company van will be insignificant and exempt from taxation only where such use is incidental to the business use. One particular example of an insignificant use which they provide is when making a slight detour to pick up a newspaper on the way to work.
How much tax will be charged on the van and fuel?
For the 2017/2018 tax year, employees within the 20% tax bracket are liable to pay a flat rate tax of £3,230 on the van benefit and £610 tax for fuel used for private journeys. The employee could pay less tax, for example, if the employee cannot use the van for 30 days in a row.
Please contact us if you would like any further guidance. SRB Associates (Leicestershire) Limited, a firm of accountants in Melton Mowbray.