Company Vehicles
Your company could be landed with a tax bill if a driver uses
a company van for private purposes, luckily, there’s a few
let-out clauses to take advantage of!
Choose Wisely
Make sure you choose the right vehicle! Take advantage of tax breaks
available on vehicles so that you can off-set these against the
running costs. Even after the rule changes from April 2005 having
a van rather than a car can still save significant amounts of tax.
Personal Use
A benefit-in-kind charge arises if your employee takes the van home
and it is then available to her for personal use. A van with a laden
weight of 3.5 tonnes or less that is used for private use has a
fixed figure of £500 a year, (£110 at the 22% rate,
£200 at 40%). If the van is four or more years old at the
end of the tax year then the taxable benefit is reduced to £350
(£77 at 22%, £140 at 40%). However, if the private use
is insignificant, then there’s a let-out we can invoke.
Restrict
If use of the delivery van is restricted to prevent private use
then no benefit-in-kind or employers’ NI charges are incurred.
It then no longer matters even if the van is used to commute to
and from work as the van is driven mainly to transport employers’
goods.
Charge
It should be made a condition for employment that whilst the van
can be used for ordinary commuting to and from work, it can’t
be used for private use unless it is paid for by the employee. Providing
the employee sticks to these rules then this should be effective,
as for making them pay, a rate per mile to cover running costs should
be enough.
Alternative Vehicle
The taxman is much more likely to believe that the employee is only
using the vehicle for commuting if they have another mode of transport,
such as a personal vehicle or even their partner’s vehicle.
Insignificant use includes occasional short journeys and when it’s
used in emergencies.
Summary
To ensure there are no difficulties with the let-out clause, ensure
that the employee has an alternative mode of transportation for
personal use and that it’s used for ordinary commuting, and
not for any private use. By following these guidelines it should
mean there is no charge and thus you won’t have to declare
the vans on the employers’ annual return of benefits and expenses.
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