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A tax free company vehicle anyone?

It’ll be little surprise to most that the taxable value of company cars is increasing over the coming years. Not only do the percentages used to calculate the taxable benefit of a car 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.

Now might be the time to consider an alternative to the usual company car.

So how about a company van?

A van with private use is taxed according to a more favourable fixed amount; £3,350 for the van and £633 for fuel in 2018/19. Compared against a typical diesel exec saloon, this could generate you and your company tax and NI savings of up to £7,600 per year!

But who wants to drive a van?

A “van” for the purposes of taxable benefits is not restricted to transit-type vehicles. Many attractive pick-up trucks, including crew cabs, which for all the world are now as luxurious as most modern cars, qualify as vans for tax purposes.

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. Case law has upheld that vans which had been modified to include a second row of seats were cars for tax purposes.

But that’s not tax free is it…?

A company van will not trigger a taxable 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.

In order for this condition to be met, any insignificant private use must be prohibited, and it would be advisable to have this included in written contracts with employees to avoid any HMRC challenges.

If you would like to discuss any of the above with us, then please don’t hesitate to contact Jane or Jamie on 01759 305 989

James Foxton FCA 26th April 2018

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