Sometimes, it might be beneficial if an employee is provided with a company van, helping them to do their job.
If this van is also made available for private use, a tax charge arises under the benefit in kind legislation. If no private use is intended, the van can then be provided tax free. If the employer pays for petrol for the employee’s private journeys, a separate charge is incurred.
What happens for business use only vans?
If the van is going to be used for business journeys only, then there will be no additional tax to pay and no employer’s Class 1A National Insurance charge.
This is the case when an employee drives to their workplace to pick up the company van, and then uses the van for work purposes and returns it back to the workplace at the end of the day.
However, journeys to temporary workplaces are also covered, and the employee can even start the van journey from their home.
How does unrestricted private use work?
Private use is defined as any use of the van other than business use. When the employee is given unrestricted private use of a van, a tax charge will arise. The amount taxed for non-electric vans is £3,490 for 2020/21 and £3,430 for 2019/20. As such, higher rate taxpayers will pay £1,396 in tax for 2020/21 and a basic rate taxpayer will have to pay £698.
The employer will also have to pay Class 1A National Insurance on the van as well as fuel charge.
What is the restricted private use condition?
If the restricted private use condition is met, then no taxes are charged. This condition is made up of two factors – the commuter use requirement and the business travel requirement.
- The commuter uses requirement states that the van should be not used for travel other than for home to work, with no other private travel. Insignificant use, such as stopping off to pick something up on the way to work is not considered a breach of this term.
- The business travel requirement states that the van should be made available for the employee’s business travel only
When the restricted private use conditions are met, there will be no tax or fuel benefit to pay.
What about zero-emission vans?
In 2020/21, zero-emission vans are charged at 80% of the full charge. So, that is £2,792. In the March 2020 budget, the Government announced that the van benefit charge would be reduced to zero for zero-emission vans from 6 April 2021.
And pool vans?
If a van meets the conditions for a pool van, no charges arise. These conditions are:
- available for use and used by more than one employee;
- available to each employee because they need it to do their job;
- not ordinarily used by one employee to the exclusion of others;
- not normally kept at or near and employee’s home;
- used only for business journeys (although limited private use is allowed if incidental to the business use).
Pool vans do not need to be reported to HMRC.
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