A RADICAL four-point plan to change company van taxation will penalise drivers of older vans, offer tax cuts for drivers using the cleanest models and introduce a new charge for the use of private fuel.

The new proposals, covering drivers who have private use of company vans, were revealed for the first time by the Inland Revenue last week.

Currently, drivers who have private use of company vans pay tax on a standard benefit charge of £500, with a discount to £350 for vehicles over four years old. The first new proposal suggests van drivers will be taxed at a different level depending on how much private use they have of the vehicle.

Importantly, however, where drivers have to take a van home for security as part of their contract, or where it is permanently equipped with tools, a lower charge would apply.

The Government believes this will also help address rocketing demand for double-cab vehicles with a payload of more than one-tonne, which are classed as vans, but are increasingly being used as company cars.

Secondly, rules governing the 40% of employees who have shared private use of a company van will be simplified.

The third proposal aims to complement reforms already introduced on company cars. Although there are no CO2 emission figures for vans, the Inland Revenue suggests scrapping the current £500 tax band and the reduction for older vans, for which one third of van drivers qualify. Instead, a higher scale charge would be introduced for older vans to encourage employers to obtain newer company vehicles.

All other vans would be judged on their emission levels according to Euro emission standards. Vehicles meeting the most stringent Euro IV standard, which is mandatory on new vans from 2006, will be taxed at a standard rate, but those which do not meet the level will incur a higher tax rate. There will also be a reduction for vehicles that run on alternative fuels under the new proposals.

Finally, in one of the biggest proposed changes, van drivers who receive free fuel for private mileage would incur a fuel benefit charge similar to the one imposed on company car drivers.

A Government spokesman said: 'The introduction of a fuel benefit charge would further align the van benefit charge with the company car tax charge making it less advantageous to opt for a van as a cheaper alternative to a company car. The Government believes that a van fuel charge, applying where free fuel is provided alongside availability of private use, would be fairer.'

Additionally, the fuel charge could be graded, based upon the level of van tax charge. If the changes outlined in the consultation document were accepted in their current form, they could mean a major change in working practices for Britain's van operators. Although the system is not as complicated as some industry figures feared, as it is not based on vehicle emissions, giving drivers a higher tax bill because their employers operate older vehicles could have major implications.

But a spokesman for the Inland Revenue said: 'The Government considers that the charge for employer-provided vans should follow the lead of the company car reform in helping to protect the environment.

'The current scale charge contains no incentives to use cleaner vans. Older vans that often have higher emissions are currently charged a lower rate than new ones. This does not send out the appropriate environmental message or encourage the use of cleaners vans.'

The consultation document, is available on the internet at Responses should be received by July 31.

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What is proposed in the consultation document

Private Use

Retention of a scale charge on the availability of a van for an employee's private use. Different levels of charge according to the level of private benefit to the individual. A lower scale charge could apply where the private benefit from home to work travel is incidental to the business need for using the van, eg private use where the employee is required to take the van home.

Shared vans

About 40% of employees who pay tax on a van benefit charge have private use of a shared van. The charging provisions for shared vans could be changed to remove the complexity and administrative burden on employers. This would be de-regulatory and save employers' time and money by allowing them to adopt simpler procedures for record keeping than are currently available.

Environment

Remove the reduction in the scale charge for older vans. Currently there is a reduction in the chargeable benefit where the van is more than four years old. Older vans would have a higher scale charge. Newer van charges would be based on Euro emission standards. Standard charge for vans meeting Euro IV standards, with a tax premium for vans that do not reach this benchmark. There would be a reduction for alternative fuels.

Fuel benefit

The Introduction of a fuel benefit charge to further align the van benefit charge with the company car tax charge, making it less advantageous to opt for a van as a cheaper alternative to a company car. The fuel charge would be based upon the level of the van charge. As with cars, employees with private use of vans would be able to avoid this van fuel charge by not accepting fuel paid for by their employer for their private travel.