Do I have a van?
Before considering your van tax bill, you need to know the definition of a van for taxation purposes. It might seem obvious, but for the record, these are the criteria that HMRC uses to classify vans and light commercial vehicles (LCVs):
- A vehicle primarily constructed for the conveyance of goods or burden•
- A gross vehicle weight – fully laden – not exceeding 3,500kg
If you’re unsure whether your vehicle is a van, the v5c logbook for the European classification – N1 and N2 are taxed as vans whereas M1 and M2 are taxed as cars. Work buses and minibuses are not vans, because they are designed to carry people. Double-cab pickups may or may not qualify, depending on HMRC’s various criteria. Essentially, any vehicle that has more than one row of seats (as pick-ups do) must have a one-tonne payload capability to be classified as a light commercial vehicle.
Is it the real thing?
The recent case of HMRC v Coca-Cola European Partners Great Britain Ltd and others [2019] UKUT 90 dealt with the very fine distinction between cars and vans.
Coca-Cola European Partners Great Britain Ltd provided their technicians with vehicles for the purposes of doing their work. The company thought that these vehicles were vans and not subject to a benefit in kind charge on their employees, or indeed to a class 1A NIC charge on the company. However, HMRC disagreed, saying that the vehicles were cars and their provision was therefore subject to both income tax and NIC.
The company provided three types of vehicle: a Vivaro, a VW ‘Kombi 1’ and a VW ‘Kombi 2’.
The First Tier Tax Tribunal (FTT) acknowledged that vehicles which are primarily suited for the conveyance of goods will share features with vehicles primarily suited to the conveyance of passengers. However, after an exhaustive analysis of all its characteristics, the FTT decided that on balance, the Vivaro should properly be described as a van (amongst other characteristics, it had more cargo space) within the meaning of s 115. The Upper Tribunal upheld this conclusion.
The finely balanced nature of the test was demonstrated by a similar analysis of the Kombi vehicles. The slightly different configuration of these vehicles, including the fact that they had seats in the front for the driver and a passenger caused the FTT to conclude that they were not vans.
Tax charges
Tax on your van can be divided into two different categories. There is the vehicle excise duty (VED), which is still often called road tax, that is paid on the vehicle, but also income tax that you may have to pay if you are using a work van for personal use.
Income Tax
The good news is that if you only use your van for business purposes, or you are self-employed, you do not need to pay company van tax, but if you are an employee and use your van for regular private use then you must pay a Benefit In Kind (BIK) to HM Revenue and Customs (HMRC).
Private use is actually quite clearly defined and anything other than using the vehicle for business purposes will mean you’ll have to pay the BIK on the van.
Employees are allowed to take the vehicle home and use the van to drive to their place of work, but much beyond that would be deemed private use. The occasional trip to the doctors or stopping on your way to work to have a Greggs (vegan or otherwise) sausage roll is classed as insignificant private use, but if you use the van for the school run or over the weekends and evenings it will be considered to be private use.
What is the Benefit In Kind on a van?
The Benefit In Kind is the value of something deemed to be a perk. Because having the use of a van for private use is a benefit on top of your salary, you must pay tax on that benefit.
In the current (2020/21 tax year) vans currently have an annual flat rate of BIK which is £3,490. If your company also pays for your fuel, usually with a fuel card, there is an additional annual BIK standard value of £666.
Zero emission vans pay 80% of the rate, meaning an employee is liable to pay £2792.Obviously, there is no additional fuel charge in respect of charging.
If you can’t use the van for 30 days in a row, or your reimburse your employer for any private use of the van or for fuel used for private use, then these amounts can be reduced or eliminated. An employer also has National Insurance obligations to pay on the BIK.
How much tax do I have to pay on a company van?
The standard value of the Benefit In Kind is, thankfully, not what an employee has to pay directly to HMRC. Instead employees pay a percentage of the BIK value based on their own personal tax obligations.
If you pay 20% tax you pay 20% of the BIK value. In 2020/21 the standard tax payable on a van is therefore £698 Obviously, if you pay the 40% tax rate that amount doubles. The same process is applied to the fuel benefit tax and for zero emission vehicles.
Road Tax Road tax or vehicle excise duty (VED) must also be paid either annually or every six months on your van. This is the tax you pay to drive a vehicle on the public roads.
Unlike passenger car road tax, which uses a sliding scale based on CO2 emissions, the VED for light commercial vehicles is relatively simple. Road tax is charged at a flat rate currently set at £265 for 12 months in the 2020/2021 tax year.
Low emission vans pay a reduced rate of £140 per year. Historically these include vans meeting at least a Euro 4 Standard registered between 01 March 2003 and 31 December 2006 (inclusive), and those meeting at least a Euro 5 Standard registered between 01 January 2009 and 31 December 2010 (inclusive). As with other vehicle classes, zero-emission electric vans are exempt from paying Vehicle Excise Duty.
SRC-Time are one of the South East’s leading accountancy firms in advising the self-employed and partnerships in all aspects of their tax affairs and we are able to assist in any issue raised above.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at info@src-time.co.uk or speak with an account manager to get any process started.
