Quarterly News

Employer provided vans.

The benefit in relation to employer provided vans increased significantly last year. Now is the time of year for P11D completion and if your policy and procedures do not stand up to HMRC scrutiny you could get caught out.

Three years ago, a new regime was introduced for employer provided vans. These changes were expected to remove over 85% of van users from any benefit in kind charge.

There is no benefit in kind charge in respect of an employer provided van where the 'restricted private use' condition is met.

Where the condition is not met the charge for unrestricted private use of the van is £3,000. Where an employer provides fuel for unrestricted private use an additional fuel charge of £500 may also apply. So, meeting the 'restricted private use' condition is vital in avoiding a hefty tax bill.

What does the condition say?

The 'restricted private use' condition is met if:

• the terms on which the van is made available to the employee prohibit its private use other than for ordinary commuting or travel between two places that is, for practical purposes, substantially ordinary commuting; and
• neither the employee nor a member of their family or household makes private use of the van other than for those purposes; and
• the van is available to the employee mainly for use for the purposes of the employee's business travel. This means that the van cannot be used for commuting purposes alone.

So ordinary commuting in an employer provided van is tax free but no other private use is allowed. HMRC have indicated that they will ignore certain occasional private journeys eg a one-off trip to the dentist but this guidance does not give much margin for error.

Proving the conditions are met

It is possible to satisfy these tests but HMRC may wish to see proof. As HMRC say, whether the conditions are met is a question of fact. Several practical issues arise.

Firstly, it is vital to have a formal, written policy, which restricts the private use to only ordinary commuting.

Secondly, the term 'ordinary commuting' has a particular tax meaning. Although the simplest example of ordinary commuting is home to office, it can be far more complicated than this, particularly for site-based employees.

Finally, proof of actual journeys is recommended. Particularly useful is a full mileage log, indicating the date of the journey, the driver, the mileage of the van at the start and end of the journey and where the journey was to.

As you can see, the rules are not straight forward. To avoid problems with HMRC, proper policies and systems need to be implemented. Please contact us if this is an area you would like to discuss further.

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