Tax & Accounting News
Company vans being monitored
09/08/2011
HMRC is increasing its monitoring of the use of company vans amid concerns that insufficient tax and NI contributions are being collected.
When a company van is used for private journeys, it creates a benefit in kind charge of £3,000 per annum. However, HMRC is concerned that the rules regarding vans are not as strict as those for cars, particularly as private use of vans can be considered ‘insignificant’ and therefore tax-free.
The legislation states that there is a nil benefit in kind charge if the employer prohibits private use other than for the purposes of commuting or if the use of the van is truly ‘insignificant’.
There is no definition of ‘insignificant’, but it can broadly be described as ‘ad hoc’. For example, making a slight detour to pick up a newspaper could be described as such, but doing the weekly shopping or going on holiday in the van could not.
HMRC has now issued questionnaires to a number of employers concerning all aspects of company van use, asking questions such as whether the employer has a van policy or whether mileage tracker devices are fitted.
If HMRC discovers that there is more than insignificant private use, it is likely to try to collect tax and NI contributions for earlier tax years as well as the current one. HMRC will seek collection of the tax underpayment from the employer rather than the employee, as it is the employer’s responsibility to operate PAYE correctly.
However, astute employers can take steps to remunerate their van drivers more tax-efficiently, as they can be classed as ‘mobile employees’ if they spend at least five hours a day away from their place of work. HMRC has agreed a tax-free subsistence allowance to such employees.
Employers with larger van fleets can therefore make significant tax and NI savings by making such payments.
