Fleet News

Inland Revenue to close van tax loopholes

A RADICAL shake-up of van taxation is being drawn up by the Inland Revenue to close loopholes that have created widespread confusion in the fleet industry. The changes will attempt to kill off tax uncertainty over double cabs and attempt to provide a clearer definition of a van that can be used when taxing private use of a company vehicle.

Double cabs are a key focus of attention because they can be taxed either as a van, attracting a £500 standard charge, or as a car, where tax is based on the list price of the vehicle. The Inland Revenue has stated that if a driver moves out of a company car into a double cab, the vehicle will be taxed as though it is a car.

However, individual tax offices treat separate cases in different ways and this has provoked intense debate over whether drivers can escape company car tax by shifting to a double cab. Debate was intensified when HM Customs & Excise announced it would treat double cabs with a payload of more than one tonne as a van, meaning VAT registered companies could effectively cut the price of the vehicle by 17.5%.

The tax changes proposed by the Inland Revenue are designed to stem confusion about Government policy and finally draw a line under the double cab issue. Mary Braim, Inland Revenue policy adviser on transport benefits, who is working with colleagues in Government to pen the new rules, said: 'At present each individual case is judged by the local tax office. This is not very satisfactory in the long term. The current vans charge has been in place since 1993 and the world has moved on since then. The car and van border has become more indistinct.

'We do not know yet the final shape of the tax, because we are starting with a blank sheet of paper and reconsidering the whole thing. We will look at realistic ways of taxing the benefit of private use of vans. One of the key things is that there is no certainty for taxpayers at the moment. Each case has to be looked at individually.'

As well as changes to rules affecting double cabs, the current tax discount for private use of vans of four-years-old or more is set to be scrapped, and a new taxation system based on carbon dioxide emissions could be introduced by 2004.

Mitsubishi, which has 25% of the double cab market, with about 4,000 sales out of the firm's total annual sales of 22,500, has warned the Inland Revenue would face tough challenges to its plans on double cabs. A spokesman said: 'Our double cabs have type approval as commercial vehicles throughout Europe, so trying to re-classify them just in the UK would create serious difficulties for the Inland Revenue. This sort of debate has been going on for years and years, but any attempt to change the rules on this could lead to a debate at an EU level.'

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