Company Van Tax

Company or business vans are treated differently by the taxman to company cars. Although this might seem strange, the tax office defines a van as a vehicle which is built primarily to carry goods or other loads with a design weight (the weight it can carry) of up to 3,500 kgs.

This tax burden was decreased in 2005 for a significant number of employees with company vans, with tax only payable if employees used their vans for private journeys rather than work-related trips. Hence, journeys made to and from work and tasks such as making deliveries or visiting customers are exempt from tax - which is a significant improvement. Employees who still use their vans for non work-related activities will, however, be charged tax. However, the tax office does state that if the private usage level is deemed 'insignificant', employees will not be charged anything. 'Insignificant' use is classified as the exception to the rule ie intermittent, irregular and at odd times during the year. Examples include dropping a child at school on the way to work or making a similar detour on the way home. Examples that will not count are taking a company van on holiday or social activities outside work.

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Taxation through private usage is as follows:

2007/08 - £3000 with tax on an extra GBP500 if employees have free or subsidised fuel for private use.

2008/09 - The rates for 2008/09 are the same as those as per 2007/08 ie £3000 plus a surcharge of £500 for fuel. This equates to tax of £600 for a 20% taxpayer and £1200 for a higher rate taxpayer (40%). The fuel surcharge is £100 for a lower rate taxpayer and £200 for a higher rate taxpayer.

Class 1A National Insurance for employers is also payable on these amounts.

However, if employees contribute towards the running costs of the van, this is taken into consideration when the tax office works out the overall business tax burden. If contributions are equal to or exceed the charge, the tax requirement will be reduced to nil. Otherwise, the overall taxation will be reduced by the amount contributed. It's important that records are kept to illustrate the overall capacity in which staff use their vans. It may also be worth stipulating how employees can use their company vans, and outlining penalties if these rules are contravened - including financial penalties.

Most importantly, make sure your business has comprehensive van or commercial vehicle insurance to protect both your employees and your fleet of company vans.

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