While the tax advantage of having a certain type of company van as a perk has reduced slightly, they remain tax efficient. But how do the tax charges compare to those for company cars?
Van or car?
You probably already know that manufacturers produce vehicles that cross the refinements of a car with the practical functions of a van. There’s a huge choice ranging from some Land Rover Discovery models to Mitsubishi double cab pick-ups and Fiat Punto vans. What these have in common is that where they are provided as a perk they are subject to much lower tax compared with a company car.
Private use is the key factor
Like company cars, company vans are taxed as a perk if they are made available for private journeys. However, unlike cars the tax on vans is worked out on a fixed amount rather than being linked to CO2 emissions and list price. For 2015/16 the fixed amount is £3,150. The table below compares the tax charges for a higher rate taxpayer for a second-hand van and car which have the same new list price and current values. The car has CO2 emissions of 180g/km meaning the taxable amount is 31% of its list price.
|List price||cost||taxable – car||taxable – van|
|Tax payable at 40%||£2,728||£1,260|
Tax and NI saved on vehicle
There’s an annual tax advantage for the van driver of almost £2,000. Plus the driver’s employer will save Class 1A NI of £506 ((£6,820 – £3,150) x 13.8%). There’s a further tax and NI saving if the company provides not only the vehicle but also fuel for private journeys. A comparison of the tax is shown in the following table.
|taxable amount of fuel*||tax – car||tax – van|
|£6,851(£22,100 x say 31%)||£2,740||N/A|
* The taxable amount for 2015/16 for cars and vans is a fixed base amount. For cars it’s £22,100 x a percentage rate set by HMRC corresponding to CO2 emissions; for vans it’s £594 – CO2 emissions don’t come into the calculation.
Tax and NI saved on fuel
Providing fuel for private motoring as a perk for a company van can therefore save even more tax than that for a car. In our example of a 40% taxpayer the saving in tax is £2,503 (£2,740 – £237) per year. The employer also faces a much lower Class 1A NI bill of just £82 (£594 x 13.8%) for the van compared with £945 (£6,851 x 13.8%) for the car.
Company van drivers also get another tax break that car drivers don’t. There’s no taxable benefit in kind at all where the private use of a van is limited to travel to and from work plus a few minor personal journeys. So the occasional trip into town, particularly where this is incorporated into a journey to or from work, won’t trigger a tax charge.
To reduce the risk of a challenge from HMRC to the tax-free status of a company van we recommend having a fair use policy for all company van drivers.
The taxable amount for a van provided as a perk is just £3,150 for 2015/16, regardless of list price and CO2 emissions. Compared to a car with a list price of £22,000 and emissions of 180g/km the taxable amount for a van is £3,670 less. The advantage applies to crossover vans, e.g. some Landrover Discoveries.