Under changes announced in the Budget by Chancellor of the Exchequer Gordon Brown, 85% of van drivers with limited private use will be taken out of the vehicle tax system altogether.

This is a major boost for van fleets which feared a complicated emissions-based tax was set to be introduced, after the idea was raised in a consultation document last year.

But for those that remain, there will be massive increases, from the current tax liability of £500 to £3,000 from 2007, with an extra £500 tax liability if the driver receives free fuel for private mileage.

The changes are designed to wipe out a loophole that allows company car drivers to switch from a car into a double-cab pick-up and save thousands of pounds in tax.

The three-year delay gives drivers time to switch out of their current vehicles in the natural fleet replacement cycle, as long as they are warned of the change by their fleet managers.

Interleasing business development finance manager Gavin Keer-Keer warned the blanket approach could affect many other fleets: ‘This will have a significant impact on company logistics. While weekend ‘white van man’ may become a thing of the past, businesses will have to look at how they store vans abandoned by the regular users.’

Importantly, if the only private use drivers have is home to work travel, then they will be exempt from benefit-in-kind tax.

But if there is any further private use the tax charge will rocket.

Budget summary

The benefit charge payable for a van available to an employee for private use is currently £500 (or £350 for a van that is four or more years old at the end of the tax year). The charge also includes any private fuel provided. But from April 6, 2005 employees who have to take their vans home and are not allowed other private use will not have to pay a benefit tax charge.

Where private use is unrestricted, the existing £500 or £350 scale charge will apply dependent upon the age of the van. However, from April 6, 2007 the discount for older vans will be removed and the scale charge for unrestricted private use will increase to £3,000 and, if an employer provides fuel for unrestricted private use, an additional fuel charge of £500 will also apply.

Self-employed van drivers are not affected by these new rules.