Company Vans - Increase in Benefit-in-Kind charge
The “white van man” may be a menace, or a saviour (depending on your opinion) on the roads in the UK, but he has received quite favourable treatment from the taxman. This changed from 6 April 2007.
It is quite common for work vans to be taken home at night – this enables the employee to start work immediately in the mornings without having to go to a central depot to pick up their vehicle. If they are prohibited from using the vehicle for any other journeys, and there is no personal use of the van, then no taxable benefit arises.
However, if the van is made available for personal use, either in the evenings or at weekends, then that use is taxable.
Historically van drivers have been treated as receiving a benefit-in-kind of £500 to cover this personal use. For a basic rate taxpayer this was a tax cost of only £110 – reducing to £77 if the van was more than 4 years old.
For 2007/08 the taxable benefit will increase by 700% to £3,500 – a tax cost of £770 at a basic rate of 22%. If fuel is provided for private use there will be an additional benefit of £500.
Employers will also face increased costs as they have to pay 12.8% Class 1A National Insurance on all benefits provided to employees. To reduce costs, employers therefore need to review their company van policies and, if not already done, issue clear guidelines and restrictions on how and when those vehicles are to be used.
Date: 22nd June, 2007
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