Big tax change for company run business vans
Drivers of company-run business vans could face a substantial hike in tax from 06 April 2007.
The £500 annual benefit-in-kind tax liability for vans rises to £3000 for 2007/08.
The discount for vans of more than four years old has been discontinued.
The rise represents an increase of 600%.
The tax also affects company-run double-cab pick-ups.
For a 22% tax payer the tax liability increases from £110 to £660 – but only if there is private usage. If the company also pays for private fuel, then this is also subject to tax.
The annual taxable benefit for employer-provided private fuel is £500. So a 22% income tax payer will be facing a further £110 charge per year in addition to the £660.
However, if the van or pick-up is used solely for business purposes, then there is no tax liability. An employer must be able to demonstrate no private usage occurred.
“The tax change will have a big impact on small businesses using vans for business and leisure,” said Lorraine Farnon, divisional vice president and UK sales director, National Car Rental.
“Clearly these businesses do not have the time or resources to monitor and track vehicle usage. They may quite rightly feel that they are being penalised for utilising their fleet rather than taking on additional vehicles for personal use.
“Small businesses represent the engine room of the economy. Yet they are facing more and more of a legislative burden,” concluded Lorraine.
Key points of the new van tax
- Annual tax liability rises to £3000 for 2007/08 tax year…
- …But there is no liability if vans are only used to commute from home to work
- Going to the supermarket would count as private mileage
- Class 1a Employer