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If a van (up to 3.5 tonnes) is made available to an employee or a director, and the van is used for private purposes, a van benefit charge of £3,600 will arise for the tax year 2022/23 (2021/22 - £3,500), irrespective of age. In addition, where an employer pays for fuel used on private journeys in a van, there will also be a van fuel benefit charge in 2022/23 of £688 (2021/22 - £669). For electric vans, the BIK is £Nil for tax year 2022/23 (2021/22: £Nil)..
When does a van benefit not arise?
A van benefit will not arise in the following circumstances:
What counts as insignificant use?
Insignificant other private use relates to an exception to normal usage that lasts for short periods on an occasional or irregular basis. Examples would be making a slight detour to buy a newspaper on the way to work or to a recycling point or rubbish tip to drop off waste.
What counts as private use?
According to HMRC guidance, private use includes using the van to do the supermarket shopping each week, taking the van away on a week’s holiday or using the van outside of work for social activities.
Employer’s reporting requirements
Where there is private use of a van, and fuel is provided for private purposes, this has to be reported as a P11D benefit in kind. There will also be Class 1A NIC payable at 15.05% on the van and van fuel benefit in July following the end of the tax year.
For example, if an employee is provided a non-electric van on which there is private use and the employer also pays for private fuel, then for the tax year 2022/23:
Benefit in kind on employee = £3,600+£688 = £4,288 and the employee will be taxed on this at his marginal tax rate.
Class 1A NIC is also payable by the employer = £4,288 x 15.05% = £645.35 (payable by 22.7.2023).
VAN vs CAR
For directors (or other employees), using a van in a business over a car can have tax advantages provided you are willing forego the enjoyment, or otherwise, of a car. This is because they are classed as commercial vehicles on which different tax rules apply. Tax advantages can include lower benefits in kind, resulting in lower tax for both the employee and the company, recovery of the VAT on the van and the availability of 100% capital allowances.
Some manufacturer’s have developed vehicles that are classed as commercial vehicles such as car-derived vans and vans with rear seats - combination vans, or combi vans. A list of such vehicles is provided on the HMRC website.
Vans with a second row of seats such as double cab vans provided they have a payload of one tonne are also classed as commercial vehicles.