At present, drivers who have private use of a commercial vehicle incur a standard taxable benefit of £500 per year, meaning a 22% taxpayer pays just £110 a year.
This has led to widespread abuse of the system as car drivers who have no need of a van at work are turning to double-cab pick-ups to save paying huge amounts of tax.
Chancellor of the Exchequer Gordon Brown is aiming to alter the system to reflect the environmental impact of vehicles.
In a statement, the Government said: 'Following initial discussions with industry and other key stakeholders, the Government will now consult on the tax treatment of company vans, with a view to deciding how best to simplify the legislation for shared vans and to encourage use of more environmentally-friendly vans.'
A consultation document will be available shortly.
Robin Dickeson, development manager, commercial vehicles, at the Society of Motor Manufacturers and Traders (SMMT), has warned that the Government faces a nightmare in creating a system which is fair, clear and environmentally friendly.
He said: 'The Chancellor's speech very much confirmed what we had expected. There are no immediate changes but a period of consultation, which we at the SMMT will be very much a part of. It will start in late spring and look at the whole issue of van taxation.
'The objective of the changes is that we need a system that is clear, environmentally-friendly and unambiguous. Green issues are very much to the fore at present and we do not think it is unreasonable to extend this to commercial vehicles.'
The Chancellor made no direct mention of penalising drivers who choose a van when they do not need one for work purposes but Dickeson said: 'We are convinced the consultation will look at the whole way BIK tax is handled at present, including the use of double-cabs by people who don't need them for work in a bid to lower their tax liability.'
Two main problems will face the Government in setting up the system: firstly, no CO2 emission figures are available for commercial vehicles and secondly, many vans are used for private purposes by more than one driver.
On the question of CO2 figures, Dickeson said: 'We do not yet know whether this system will be based on CO2 emissions but if it is it may not be reasonably practical for manufacturers to produce meaningful figures.
'There are thousands of different van derivatives which will all have different figures. Also, should the figures be produced with a van unladen or laden?'
On the question of multiple use, Dickeson said: 'This is a complicated issue and the Government has got to think very carefully to make a clear, easy system which is not open to interpretation by different tax offices as is the case at present.
'We also recognise the danger of the odd driver who takes his van home from work, as he is in a very different position than the user-chooser car driver. But the Government has got to be seen to be fair, clear and environmental.'
Meanwhile, the Association of Car Fleet Operators (ACFO) broadly welcomed the move but warned of possible problems ahead.
Director Stewart Whyte said: 'The current flat rate of £500 a year, set in 1992/3, is now completely out of date and bears poor comparison with the taxation of cars – which might be from the same employers.
'The indications are that the Government wants to bring in a strong environmental component in this area. ACFO has no difficulty with this, but would want to avoid any situation of driving tax on poorly-understood or ill-defined green data.
'Currently, no such data is collected by the Driver and Vehicle Licensing Agency or the Vehicle Certification Agency so there is no public understanding of a green scale.'
Whyte stressed that ACFO 'would participate in the consultation, to ensure that commercial fairness prevailed'.
He said: 'Unlike cars, vans are always picked for the job, so drivers have virtually no say in what van they drive. It would be unfair if the driver were taxed on modest private use of an expensive and un-green van, if that is the best one for the employer's job.
'Equally, there now needs to be a firm conclusion over the double-cab issue - drivers electing to use a highly-specified full four-seater pick-up truck with a payload of at least one tonne, and paying only a fraction of the tax of a comparable car.
'We believe the Government understands most of the issues and we will work to ensure that the final system is fair, realistic - and of course, clear, transparent and simple to understand for employers, drivers and local tax offices alike.'
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