vans for employees - October 2004

The tax implications of providing a van to an employee are changing from April 2005.

From April 2005, there will be no charge to tax as a benefit in kind, if the private use is insignificant. Additionally, there will be no benefit in kind (and therefore no tax) if the restricted private use condition is met. The exemption will only apply if the van is made available to the employee mainly for the purposes of the employee’s business travel. In such cases, the exemption may be available if private use is restricted to the employee’s ordinary commuting – this refers to home to business travel.

From April 2007, the benefit in kind charge of a motor van increases from £500 to £3000 with an additional £500 charge if fuel is provided.

It is therefore essential that the provision of a company van is properly structured to reduce the tax burden on the employee. Remember employers have to pay Class 1 National Insurance on the benefits in kind provided to the employees.

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