TT60: Company Van Tax

February 22, 2005

From 6 April 2005 company van tax changes

Currently, employees who have private use of a company van are charged with a benefit in kind of £500 (or £350 for older vans).

From 6 April 2005 they will have that charge reduced to nil if:

  • they have the van mainly for business travel, and
  • any private use other than for journeys to and from work is insignificant.

Also, where there is no tax charge on the van there will be no Class 1A charge for the employer either.

So what’s “insignificant”?

The word “insignificant” is not defined by the Inland Revenue, so it takes its normal English meaning. For example, the New Oxford English Dictionary says it means “too small or unimportant to be worth consideration”.

Examples from the Inland Revenue to illustrate what they take to be insignificant use are when an employee:

  • takes an old mattress or other rubbish to the tip once or twice a year
  • regularly makes a slight detour to stop at a newsagent on the way to work
  • calls at the dentist on his way home.

Examples they give of use which is NOT insignificant are when an employee:

  • uses the van to do the supermarket shopping each week
  • takes the van away on a week’s holiday
  • uses the van outside of work for social activities.

…and what about travel to and from work?

Home to work journeys are still considered to be private use, but the new rules allow employees to use their van for these journeys without paying tax.

Barnes Roffe Topical Tips

If any of your employees meet the conditions for a nil charge from 6 April 2005, please contact your Inland Revenue PAYE office and let them know:

  • your employer reference number,
  • the names of all van users, and
  • their National Insurance number.

The Inland Revenue will then change the employees’ tax codes so they pay the right amount under PAYE from 6 April 2005. It is a good idea to consider providing the information as soon as possible so that your employees start the year with the correct tax code.

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