A tax-free company vehicle?
Expensive cars
Company cars have become increasingly expensive from a tax and NI point of view, especially if private fuel is provided. Not only do the percentages used to calculate the taxable benefit tend to shift upwards each year, but the loophole of using salary sacrifice to reduce the in-pocket cost to the employee was shut down in 2017. Salary sacrifice arrangements for cars that were in place at 6 April 2017 will remain effective until they are renewed or revised in any way. In practice, you are likely to find yourself being asked to give advice on tax-efficient alternatives as these come to an end.
company van?
A van with private use is taxed according to a (usually more favourable) fixed amount; £3,350 for the van and £633 for fuel in 2018/19.
Example. To illustrate the potential savings, consider a diesel car with CO2 emissions of 146g/km with a list price of £35,000, and some private fuel provision. The taxable benefit in kind will be £10,850 for the car plus £7,254. Provision of a van at the fixed rates (above) would save a higher rate employee £5,648 in 2018/19, as well as saving the employer £1,949 in Class 1A NI.
A “van” for the purposes of the benefits code is not restricted to transit-type vehicles, many attractive pick-up trucks also qualify. The treatment is not defined clearly in statute so you have to look at case law to determine it.
In general, a vehicle will be considered a van if its construction makes it primarily suited to transporting goods rather than passengers. A further rule (actually applicable to VAT) applying specifically to double-cab pick up vehicles has also been generally accepted by HMRC. Such a vehicle will be a van for tax purposes if it has an unladen weight of at least one metric tonne.
Pro advice. If your client is looking to rely on this, advise them that if the vehicle has a removable hard roof, they need to deduct 45kg from the weight as stated by the manufacturer.
In particular, care must be taken with vehicles that are clearly constructed for use as a commercial van, but are subject to modifications which change their suitability. The First-tier Tribunal in N Payne et al v HMRC [2017] TC06082 (see Follow up ) held that two vans which had been modified to include a second row of seats were cars for tax purposes.
Tax free
A company van will not trigger a benefit in kind if the provision meets the “restricted private use” condition. This means that the employee can only drive the van on business purposes, but crucially ordinary commuting between the home and workplace also counts as business travel as discussed at EIM22795 (see Follow up ).
Again, this is far better than the position for a car, where any commuting would cause any claim that the car is only used for business travel to fail.
In order for this condition to be met, any significant private use must be prohibited.
Pro advice. If your client wants to take advantage, have them provide the employee with written terms of use that prohibit any significant private use.
N Payne et al v HMRC [2017] TC06082
EIM22795
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