Knowledge Centre
20th July 2010
Van drivers are now paying around four times more than they were in 2006/07, following the stiffening-up of a tax measure designed to clamp down on business vehicle 'perks'.
According to accountancy firm UHY Hacker Young, the 'new' tax - essentially a hike in an already-existing tax liability - now accounts for HM Revenue & Customs (HMRC) collecting £40 million from van drivers, compared to the £10 million it amounted to in 2006/07.
Announced by the Labour government in April 2007, the increase potentially affects any employee who drives a goods vehicle with a maximum legal laden weight of 3,500 kilograms for their own private use.
The taxable benefit in kind has risen from £500 - or £350 for vans over four years old - to a flat £3,000. If fuel is also provided by the employer, this figure increases by an extra £500.
This means that anyone who uses a company van for their own private travel - not including commuting to work - has seen the amount they could pay greatly increase.
Prior to April 2007, basic-rate - at that time 22% - tax payers driving an older vehicle would have paid just £77 for the benefit of private use. This has now increased to £770, while those driving a newer vehicle have seen the tax they pay rise from £110 to £770.
Meanwhile, employees paying higher-rate tax of 40% are now paying £1,400 for older vans - a ten-fold increase - while drivers of newer vans have seen their tax rise from £200 to the same £1,400 figure.
UHY Hacker Young is highlighting the toll that the measure has been exacting on small firms throughout the economic crisis of the last two years.
Tax partner Roy Maugham said: "This tax increase has had a huge impact on small businesses, many of whom have been struggling with rising costs during the recession.
"Vans are an essential tool for many small traders and this tax hike has come at a time when other costs, such as fuel, have also risen sharply.
"Small traders often economise on transport costs by using their business vans extensively for private use, so this tax rise has hit them hard."
In addition, the company is highlighting the difficulties that the increase in liability has posed to businesses, who its says have had to re-think their policy.
Maugham added: "HMRC is not giving drivers much leeway about what constitutes permissible private use of a van.
"It is very difficult for employees who are allowed to take vans home to avoid this tax charge.
"Using the van to pick up the kids at the weekend will almost certainly result in the van being taxed as a benefit."
According to the Federation of Tax Advisors - which flagged-up the change when it came into effect - the tax hike was brought in by the government in order to close the tax "loophole" which allowed pick-ups with relatively luxurious cabs to double as private cars outside of work hours.
The HMRC website provides guidance on the taxation and use of company vans.
IMAGE Ren weihong/AP/Press Association Images
Whatever tax you pay on your business van, save money with MORE TH>N's cheap van insurance.
Private use van drivers 'paying 300% more tax'
According to accountancy firm UHY Hacker Young, the 'new' tax - essentially a hike in an already-existing tax liability - now accounts for HM Revenue & Customs (HMRC) collecting £40 million from van drivers, compared to the £10 million it amounted to in 2006/07.
Announced by the Labour government in April 2007, the increase potentially affects any employee who drives a goods vehicle with a maximum legal laden weight of 3,500 kilograms for their own private use.
The taxable benefit in kind has risen from £500 - or £350 for vans over four years old - to a flat £3,000. If fuel is also provided by the employer, this figure increases by an extra £500.
This means that anyone who uses a company van for their own private travel - not including commuting to work - has seen the amount they could pay greatly increase.
Prior to April 2007, basic-rate - at that time 22% - tax payers driving an older vehicle would have paid just £77 for the benefit of private use. This has now increased to £770, while those driving a newer vehicle have seen the tax they pay rise from £110 to £770.
Meanwhile, employees paying higher-rate tax of 40% are now paying £1,400 for older vans - a ten-fold increase - while drivers of newer vans have seen their tax rise from £200 to the same £1,400 figure.
UHY Hacker Young is highlighting the toll that the measure has been exacting on small firms throughout the economic crisis of the last two years.
Tax partner Roy Maugham said: "This tax increase has had a huge impact on small businesses, many of whom have been struggling with rising costs during the recession.
"Vans are an essential tool for many small traders and this tax hike has come at a time when other costs, such as fuel, have also risen sharply.
"Small traders often economise on transport costs by using their business vans extensively for private use, so this tax rise has hit them hard."
In addition, the company is highlighting the difficulties that the increase in liability has posed to businesses, who its says have had to re-think their policy.
Maugham added: "HMRC is not giving drivers much leeway about what constitutes permissible private use of a van.
"It is very difficult for employees who are allowed to take vans home to avoid this tax charge.
"Using the van to pick up the kids at the weekend will almost certainly result in the van being taxed as a benefit."
According to the Federation of Tax Advisors - which flagged-up the change when it came into effect - the tax hike was brought in by the government in order to close the tax "loophole" which allowed pick-ups with relatively luxurious cabs to double as private cars outside of work hours.
The HMRC website provides guidance on the taxation and use of company vans.
IMAGE Ren weihong/AP/Press Association Images
Whatever tax you pay on your business van, save money with MORE TH>N's cheap van insurance.
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