When we talk about company car tax, we tend to talk about cars. A lot. The clue is in the name, ‘company car tax’. But obviously, not everyone who has a company vehicle has a car, there are many people who drive company vans.
So, what about vans? Do the same rules apply? And which vans are the best for low company car tax?
In this article, we take a brief look at company car tax for vans, whether the same rules apply, and which vans you should be looking at for low company car tax.
What is a van?
It may seem like a silly question, but it’s important that you know what is considered a van in the eyes of the HMRC. So, a van is;
- A vehicle primarily constructed for the conveyance of goods or burden
- A gross vehicle weight – fully laden – not exceeding 3,500kg
Work buses and mini buses are not vans. This is because they are designed to carry people. Double-cab pickups may qualify, but we’ll go into that in more detail in a little bit.
Do I have to pay company car tax on a van?
You will still have to pay company car tax on a van. However, the rules do differ slightly.
Like a company car, you do not have to pay company car tax on a van if you are using your van for business journeys or as a pool van.
What counts as a business journey?
According to the HMRC, a business journey is a trip;
- That is made part of work (travelling between appointments, for example)
- To a temporary workplace
You can also use your car for ‘insignificant’ private journeys without having to pay company car tax. For example, picking up a newspaper or grabbing a coffee on the way to work.
What is a pool van?
A pool van is essentially a vehicle that your employees share. According to the HMRC, a pool van counts as the following;
- It’s available for use and is used by more than 1 employee
- It is available to each employee so they can do their job
- The van isn’t ordinarily used by 1 employee to the exclusion of others
- It isn’t normally kept at or near employees’ homes
- The van is only used for business journeys
o Limited personal use is allowed if it is incidental to a business journey. For example, driving the van home in order to get an early start the next day.
How is the company car tax for a van calculated?
If you do have to pay company car tax on your van, then you will have to do the following;
- Report the cost on form P11D
- Pay National Insurance on the value of the benefit
However, there are some differences between how much you have to pay and how it is calculated. With a car, you have a sliding BIK rate. This depends on how much CO2 your car emits, the P11D value and your personal tax bracket. However, this is not the case with a van. Instead, there is a fixed BIK rate, this is £3150. So, say you are in the 20% tax rate, then you will be paying 20% of £3150. This is £630 a year or £52.50 a month.
Your van and private journeys
If you are using your van for private journeys, then there is a standard value of £3,150. However, this can be reduced if;
- Your employee can’t use the van for thirty days in a row
- Your employee pays you privately to use the van
- Other employees use the van – you then divide the £3,150 by the number of employees that use the van.
Fuel and private journeys
If you are paying for your employees private fuel, then you will need to pay £594 as standard. Again, this can be reduced if;
- The employee can’t use the van for thirty days in a row
- The employee pays back their private fuel
- You stopped providing fuel during the tax year
Company Car Tax and Zero Emission Vans
So, what about if you have a zero emission van? In this case, you will report that on the P11D at 20% of the £3,150 which is £630.
You will find that most payroll software packages have the ability to work out these reductions for you. You can also use the HMRC website in order to do this.
Company Car Tax and Pick-Ups
If you have a four-door, four seat pickup then the principles and fixed BIK rates apply. However, there is another layer of complication that makes it a little bit more tricky. To qualify as a company car, your pickup must;
- Have a payload of at least one tonne – this is how much it must be able to carry to be classified as a Light Commercial Vehicle
- This does not include a removable hardtop cover
The good thing about is that many 4×4 pickups are designed to meet the HMRC requirements, even with a removable hardtop. They also have the luxuries you find with cars such as leather seats, sat-nav and infotainment systems. You can read more about company car tax for pickups here.
Is it more tax efficient to get a company van?
Is it really worth getting a company van? After all, you will probably still have to pay company car tax, is it tax efficient?
There are benefits to getting a company vehicle. For example, you can offset 100% of the VAT on a van if you went via your business. Also, if you choose to go through a business contract hire, then your vehicle will be “off balance sheet”.
Not to mention the fixed BIK rate. This is a huge advantage compared to getting a company car. It’s one of the reasons 4×4 Pickups are becoming increasingly popular company cars, because they count as vans and therefore qualify for the considerably lower BIK rate. Many vans and pickups emit quite a bit more CO2 than cars, meaning that if they were taxed the same way, you could end up paying a fortune in company car tax.
So, a van is a very tax efficient, particularly if you can reduce it in any way.