What about vans?
Unlike cars, company vans can be used for commuting without incurring tax.
HMRC also allows ‘insignificant’ private use such as a detour to drop children at school on the way to work or using the vehicle to take large household rubbish away once or twice a year.
However, using the van to go on holiday or for regular trips to the supermarket would not be considered ‘insignificant’.
In this instance, the employee would pay £3,000 a year in tax for the van and £550 for any free or subsidised fuel for private use.
Employers pay Class 1A National Insurance Contributions (NICs) on the same amounts.
HMRC has started to check up on van usage by monitoring supermarket car parks, campsites and holiday destinations like Centre Parcs to check that anyone using a van with livery on is paying for personal use.
If that person isn’t paying tax, HMRC will require their employer to prove that other drivers aren’t doing the same – the approach is guilty until proven innocent. According to Paul Jackson, the problem is “rife”.
“It’s a smaller cost , but it’s a big problem,” he says. “Most van drivers go beyond incidental use.”
Companies should keep mileage records and get their employees to sign an agreement about the use of the van to prove it is not used privately.
If an employer considers there is no tax to pay, they will need to keep sufficient records to show that the employee has the van mainly for work journeys and that private use is restricted to journeys between home and work.
This may include making the conditions clear in employment contracts or asking employees to sign a statement acknowledging company policy on what is allowed and any disciplinary consequences.
An employer may also want to keep mileage or other records showing how the vehicles are used to help with this.