Are You Falling Foul Of The HMRC White Van Man

Entered by: Jon Rush @ 17:06:24 on 08/09/09

In 2008 the HMRC changed its rules regarding employees using their company vans for private use without incurring any tax costs. So why nearly a year on are we telling you about it – well because this weekend when walking around the sunny streets of Brighton, I couldn’t but help notice either the number of employees either employed to undertake driving duties at the weekend or the number of company vans that were in use, possibly flouting the rules and leaving themselves open for a heavy tax demand and bill.

Here’s the techie bit - the definition of a company van in the eyes of the HMRC is any vehicle with a maximum laden weight of upto 3,500 kilograms. Secondly, a company van is a vehicle made available to an employee by virtue of the tasks they are employed to carry out.

In the past, the HMRC used a flat rate tax calculation for personal use of a company van, which was minimal to the user. However, like some many things the HMRC are clamping down and have changed the rules, so we thought it would be best to give a gentle reminder to you all.

How do I know if the employee has private usage?

Employees have to pay tax on a company van if they have significant private use of the vehicle. Significant use is defined as use and availability for holidays, regular supermarket shopping, and/or regular weekend use, to name but a few.

Whilst on the reverse, private use is deemed to be insignificant if:-

The private usage is the exception rather than the norm
Trips made are irregular, so the ad hoc trip to the doctors
Lasts for short periods of time on odd occasions in the year

How much will the tax bill be?

Remember tax is personal so it is the employee that will become liable and therefore the taxable amount levied on each employee for private use will be £3,000 for the use of the van and a further £500 if fuel is also provided. As the Employer you will have pay Class 1A National Insurance contributions on these amounts as well.

So if your employees have access to their vans and use them for personal use, the way the employee can reduce the tax liability is by them contributing towards the cost of the private usage. Sadly, they and you cannot avoid the fuel tax and employer national insurance contribution unless the employee pays the full amount of £500 towards the fuel.

The tax liability can be reduced if another employee has use of the van for part of the year or does not have full use of the van for the whole year for any other reason.

What are my responsibilities as the Employer?

As the Employer, it is your responsibility to put systems and records in place to aid your annual returns. We recommend that you:

ask all vehicle drivers to record mileage undertake and keep records of mileage to show where the van has been used.
get the employee to sign a disclaimer letter stating that the van will only be used for work purposes and that should any tax become payable, the employee will have to pay all tax amounts including the Employers NI contributions. This letter should be renewed each year.
include use of van details in the employment contract and consider having a vehicle policy devised.
track who is using the van on a monthly basis and in what proportions, including periods of 30 days or more where the van was not in use.

Further guidance on the taxation and employer duties relating to Company Vans can by found if you log onto the HMRC website at www.hmrc.gov.uk/vans

If you would like your employment documentation reviewed in line with the recommendations above, give us a call on 0845 6100 651.