Where are your Vans?
On 6 April 2005 HM Revenue & Customs relaxed their rules on the treatment of company vans whereby if your employees only used the van for business and home to work and other ‘insignificant’ private travel, they were not liable to tax on the benefit of having a van, provided that the van is used by them in their job on a day to day basis.
To satisfy HM Revenue & Customs they suggested that you have signed documentation in place between the employer and employee to confirm that no significant private travel was being undertaken in the van.
This relaxation of the rules to allow home to work travel in a van meant that a high percentage of company van drivers were removed from the benefit in kind system. But what about those who continued to use their vans for ‘significant’ private travel?
HM Revenue & Customs announced that from 6 April 2007 anybody who undertakes, or is found to undertake, significant private mileage in their company vans will face an increased annual benefit in kind of £3,000 a year with an extra £500 benefit where private fuel is provided.
As you can see it is going to be advantageous to both employees and employers state that vans are only going to be used by employees for business and ‘insignificant’ private use. But who is going to police this? Is it enough to put the paperwork in place but still let employees use the vans as they wish? How are you going to ensure that your employees are not breaking the rules? If you don’t monitor it, HM Revenue & Customs will be quite happy to do it for you.
HM Revenue & Customs has caught up with the age of digital photography and they are just waiting for your employees to slip up. Supermarkets are going to be prime targets. How easy is it going to be to spot your employees van at the local supermarket each week? What about the local football match, or at the DIY store?
If HM Revenue & Customs can prove that the vans are being used for significant private use then you, and your employees, risk being taxed on the amounts shown above and potentially open up an avenue of investigation.
You need to ensure that you clearly enforce the rules and make sure your employees sign the declaration to agree them. Call us now for further information and your copy of the declaration forms.