Vans can be very tax efficient as they are not subject to the strict
company car rules and enjoy a slightly less onerous regime.
Firstly, you are entitled to a 100% capital allowance in the year of
purchase, no matter how old or dirty it is. Vans are defined as plant
and you can therefore include them in the £50,000 Annual Investment
Allowance. CO2 emissions are irrelevant for vans. It is also worth
noting that VAT is re-claimable in full on the purchase of vans as they
are commercial vehicles.
Secondly, the taxable benefit on private use of a company van is a flat
£3,000 per annum, which is usually less than for a car with equivalent
CO2 emissions. Fuel is even more generous at £500 per annum,
although you would need to make sure that private mileage was high
enough to make that worthwhile.
Thirdly, the rules on private use are less onerous than for a car
because:
a) It is actual use that counts rather than the availability of the van;
b) Insignificant private use can be ignored; and
c) Home-to-work travel and overnight parking near your own home are
not taxable.
All the same, the tax on private use of company vans is far higher than
it was a few years ago when the taxable benefit was only £500 (or
£300 if the van was more than 4 years old). The only relaxation on the
old regime is that it is actual use that counts rather than mere
availability.
Private Use
Insignificant private use of a van is notably less stringent than
incidental private use of a pool car. With pool cars private use must
only happen during a business trip for it to be incidental, but for a van
you can do things like taking rubbish to the dump once or twice a year,
regularly taking a slight detour to drop your children off at school on the
way to work or dental appointments on the way home from work.
You can also use the van as often as you like it to travel between
home and work, even if that would be defined as ordinary commuting
for any other purpose. It follows that overnight parking near your home
is also non-taxable. Neither of these private uses is allowed for pool
cars other than in exceptional circumstances.
The conditions for insignificant private use are:
a) It is very much the exception to the normal use of the van
b) It is intermittent and irregular; and
c) It lasts for only short periods of time on odd occasions during the
year.
Unacceptable uses would be taking the van on holiday, using the van
outside work for social activities or regularly taking it to a supermarket
to do your shopping. If you want to do anything like this, it would
probably scupper the van’s tax free status for the whole tax year
unless you sold it and bought a new one, in which case you could
confine your private use to the old van. Transferring the keys to your
employees for the rest of the tax year would not work however as you
have the authority to demand them back again at any time.
There is no tax charge for mobile phones fitted to the van or
reimbursements for the cost of parking at or near your place of work.
This parking concession applies to cars as well and is one of the few
tax free perks still existing.
What is a Van?
According to Section 115 of ITEPA 2003, a van is a mechanically
propelled road vehicle that:
- a goods vehicle primarily suited for the conveyance of goods or burden of any description
- has a design weight not exceeding 3,500 kilograms; and
- has (or is meant to have) at least 4 wheels
Passengers are not classed as a burden (not even chauffeur-driven
MPs) so a minibus (for example) is not a van.
Anything exceeding 3,500 kilograms is not a van but a heavy goods
vehicle. These are non-taxable provided they remain in the company
name are not used wholly or mainly for private use, something that is
unlikely to occur with an HGV although, unlike vans, you must count
home-to-work travel as private use.
Double Cab Pick-ups
There are a number of vehicles known as double cab pick-ups that
may (or may not) be treated as vans rather than cars for tax purposes.
The tax advantages to the purchasers are obvious as the regime for
vans is less onerous (see above) although most owners probably buy
them for their qualities in transporting both goods and people rather
than for tax reasons. They are usually more of a lifestyle choice
although the major manufacturers recognise that the company car
market is a big contributor to sales.
What is a double cab pick-up? A vehicle of this sort normally has:
- a front passenger cab that contains a second row of seats
- four doors capable of being opened independently; and
- an uncovered pick-up area behind the passenger cab
Typical examples are the Ford Ranger, the Mitsubishi L200 and the
Isuzu Rodeo.
They can get away with being treated as vans rather than cars if the
predominant reason for their construction is to carry goods or burden
rather than passengers. It does not matter what they are actually used
for later. This will depend on various factors relating to their
construction and the Revenue has stated that it is not possible to come
up with a single categorisation for all double cab pick-ups.
However, any such vehicle that has a payload of at least 1 tonne
(1,000 kg) will definitely be accepted as a van in line with the
definitions used for VAT purposes. Payload is defined as gross vehicle
weight less unoccupied kerb weight. If a hard top has been added to
the pick-up area this must also be deducted. Under a separate
agreement between the Revenue and the Society of Motor
Manufacturers and Traders (SMMT), a hard top consisting of metal,
fibre glass or similar material, with or without windows, is accorded a
generic weight of 45 kg. Therefore, the addition of a hard top to a
double cab pick-up with an ex-works payload of 1,010 kg will convert
the vehicle into a car as the net payload would be reduced to 965 kg.
Under this agreement, the weight of all other optional accessories is
disregarded. Care needs to be taken when looking at brochures
produced by manufacturers as payload is sometimes defined
differently.
Do your research if you decide to buy a double cab pick-up principally
to save tax. The salesman may be quick to point out the tax efficiency
of a particular vehicle but it is only the Revenue’s opinion that counts
so don’t fall for the sales patter. Don’t bother asking your local tax
office either as they are instructed not to give definite answers on
individual vehicles. They will merely refer you to the general advice on
their website.
Our Recommendations
We would suggest that you keep the following records for all company
vans:
- a detailed mileage log recording each individual journey
- the destination and purpose of each journey
- a regular reconciliation of the odometer to the mileage log for each vehicle
- all drivers to sign contracts stating that no significant private use is allowed
- fuel bills to be checked against mileage records to ensure they look compatible
- all records to be reviewed by a responsible person at least monthly and any anomalies reported
