BENEFIT-IN-KIND CHARGES FOR EMPLOYER PROVIDED VANS

From 6 April 2007, the benefit-in-kind charge for employer-provided vans increases from £500 (or £350 for old vans) per year to £3,000 per year. If private fuel is also provided for the van, an additional benefit-in-kind charge of £500 arises.

For a basic rate taxpaying employee the tax payable on the benefit-in-kind charge could increase from £110 (or £77) to £770. A higher rate taxpayer could end up paying £1,400 per year! For the employer also the Class 1A National Insurance cost increases from £64 (or £44.80) to £448.

There can be a way to avoid these charges as specific conditions exist that exempt both the van and the fuel charge. To qualify, broadly, the van must not be available for private use but can be available for travel to and from work.

On a related note, a business may be able to recover VAT on road fuel purchased be an employee (and reimbursed). To be able to do this, the employees must provide the employer with sufficient fuel invoices to support the total cost of business fuel reimbursed.

The VAT recoverable still needs to be based on business mileage and the set fuel rate. HM Revenue & Customs have issued new rates for use for journeys on or after 1 February 2007 and these are reduced from the previously issued rates.

These charges can be avoided for both the employer and employee. Please contact us for further details.