Employers – Help Us To Save Your Van Drivers Tax

 

From 6 April 2005, employees who have private use of a company van and are currently charged with a benefit in kind of £500 (or £350, depending on the age of the van) will have that charge reduced to nil if:

• they have the van mainly for business travel, and
  any private use other than for journeys to and from work is insignificant.
• Home to work journeys are still considered to be private use, but the new rules allow employees to use their van for those journeys without paying tax.

And where there is no tax charge on the van there will be no Class 1A charge either.

The word ‘insignificant’ is not defined, so it takes its normal English meaning. For example, the New Oxford English Dictionary defines it as, “too small or unimportant to be worth consideration”. These examples illustrate what it means in practice:

Examples of insignificant use: an employee who

• takes an old mattress or other rubbish to the tip once or twice a year
• regularly makes a slight detour to stop at a newsagent on the way to work
• calls at the dentist on his way home.

Examples of use which is NOT insignificant: an employee who

• uses the van to do the supermarket shopping each week
• takes the van away on a week’s holiday
• uses the van outside of work for social activities.

If any of your employees meet the conditions for a nil charge from 6 April 2005, please let us know:

• your employers reference number
• the names of all van users, and
• their National Insurance Number.

We can then change their tax code so they pay the right amount under PAYE. Our annual re-coding exercise starts in January, so if we could have this information as soon as possible, we can then save you time and effort in changing their tax code in year.

 

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