December 05, 2016

Vanman’s guide to company van tax

There is no need to be alarmed, you may think that company van tax is a complicated phenomenon. After all, those of you who have ever driven a company car will know first hand that the tax is based on a number of factors, including the car’s value, fuel and vehicle emissions. However this is not the case for company van tax, Vanman explains.

Introduction to company van tax

If your van is used 100% for work then you will not have a tax bill whatsoever, HMRC defines this as ‘insignificant private use.’ The reasoning behind this is that there is viewed to be no ‘Benefit-in-Kind’ (BiK) combined with the vehicle that your employer is providing you with. However if you also use your company van for ‘private use’ (defined again by HMRC) then you will be required to pay BiK company van tax.

What does the HMRC define as a van?


We all know what a van is, but before you work-out your tax bill, it is important to understand for tax purposes what the HMRC defines as a van.

HMRC defines a Light commercial vehicle (LCV) as:

  • A vehicle primarily constructed for the conveyance of goods or burden
  • A Gross vehicle weight (GVW) that doesn’t exceed 3500kg when fully laden

Minibuses are designed to carry people and hence are not classed as vans, whereas doublecab pick-up vans are reliant on various criteria to determine whether or not they qualify.

How do you define ‘Insignificant private use?’


So what exactly qualifies as insignificant private use? As this may appear to be very subjective. However HMRC is relatively clear as to what constitutes private use. You can travel to and from work, with the very odd detour (to the doctors or post office), but that is it. If you use your company van for any of the following, your company has to inform HMRC by law: School run, shopping trips, taking the kids to parties or sports training, these all constitute ‘significant’ private usage. Your company should record your mileage, whether it is private use or not, just incase the tax man comes knocking.

What is the company van tax rate?


So you’re due to pay tax, however this may not be as bad as first thought. This is far less than the tax due if you were driving a company car, with a uniform BiK rate for vans which sits at £3170. You don’t have to shell out this entire amount, to work out company van tax you simply multiply you personal tax rate times the fixed £3170, for example if your tax rate is 20% you pay one-fifth of the BiK fixed rate which would equal £630 per year, this obviously varies depending on your personal tax rate.

If the fuel in your van used for private use is paid for by your employer, then you are also liable to a BiK rate, in this instance £598, so using 20% as an example again, that tax payer would be liable to pay £119.60 per year.