Taxable Benefits – Vans and Cars

First published on 08 April 2020 by Alastair
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Where employees are given private use of a company vehicle, this will create a taxable benefit for the employee.  There is then a further taxable benefit if the fuel for the vehicle is paid for by the company.  As with other benefits, a ‘cash equivalent’ is calculated and this is then treated as taxable income for the employee, and the company needs to report the benefit by submitting form P11Ds and pay Class 1A NIC on the amount.

The cash equivalent is calculated differently depending on whether the vehicle is a van or a car:

Car

The cash equivalent for providing a company car is calculated using its taxable value multiplied by a set percentage.

The ‘taxable value’ of the car is the manufacturers price for the vehicle when new, as opposed to the cost actually paid.  This information should be available from the garage that sold the vehicle.

The percentage used in the calculation is based on the vehicles C02 emissions and electric range (where appropriate).  From 6 April 2020, the percentages are changing significantly in order to reduce the benefit on electric cars, as shown in the below table:

C02 Emissions

Electric range (miles)

Benefit Percentage

0

 

2

1 – 50

Over 130

2

1 – 50

70 – 129

5

1 – 50

40 – 69

8

1 – 50

30 – 39

12

1 – 50

Under 30

14

51 – 54

 

15

55 – 59

 

16

60 – 64

 

17

65 – 69

 

18

70 – 74

 

19

75 – 79

 

20

80 – 84

 

21

85 – 89

 

22

90 – 94

 

23

95 – 99

 

24

100 – 104

 

25

105 – 109

 

26

110 – 114

 

27

115 – 119

 

28

120 – 124

 

29

125 – 129

 

30

130 – 134

 

31

135 – 139

 

32

140 – 144

 

33

145 – 149

 

34

150 – 154

 

35

155 – 159

 

36

160 and above

 

37

Where fuel is provided, the same percentage determined for the car benefit is multiplied by the fuel ‘fixed figure’.  From 6 April 2020, the fixed figure will be £24,500.

Van

For vans, the benefit is a standard amount.  From 6 April 2020 the cash equivalent for providing a van will be £3,490 pa, and for providing fuel for the van will be a further £666.

When is a Car actually a Van?

For a lot of vehicles, it is not immediately obvious if it should be considered a car or a van for the purpose of calculating the taxable benefit.  Double cab pickups and goods and people transporters are two types of vehicles popular for company cars that fall into this grey area. 

Our experience has found that vehicle salesmen can misinterpret the rules regarding the classification of vehicles and may advise that a car qualifies as a van for tax purposes when it does not.  The rules that need to be considered for these types of vehicles are:

Double Cab Pickup

HMRC generally accept that double cap pickups can be classified as a van if they have a payload of more than 1 tonne.  This, along with the characteristics HMRC’s expects of a double cab pickup are set out in their employment manual  https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23150

Goods and People Transport

The rules regarding vehicles that are designed to transport both goods and people are not as clearly set out and need to be determined on a case by case basis.  It comes down to the characteristics of the individual vehicle and if it was designed to primarily be a goods vehicle (van) or a people carrier (car).  A recent tax case (Coca Cola v HMRC) and its subsequent appeal can be used as a useful guide for the characteristics that need to be examined.

In this case, three different vehicles were examined (one Vauxhall Vivaro and two Volkswagen Transporter Kombi’s) all of which were used by Coca Cola to transport goods:

  • The Vivaro was deemed to be a van after considering the engine/transmission, the sliding and rear doors, the design of the suspension and braking system with regards to payload, and the space available to carry goods without modification to any seating.
  • The Kombis were considered to not be “constructed primarily” for carrying goods based on its basic design sharing a lot of characteristics of Vauxhall minibuses, and the space taken up by the seats compared to the space available for goods.

If you are considering providing vehicles as a benefit of your company and want to ensure that the correct tax treatment is applied or would like assistance in dealing with your reporting requirements, M&S are available to help.

Chris Leslie, Tax Senior

 

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