Fleet News

LCV operators urged to act on tax changes

LCV operators are advised to begin reviewing the use of company vans by their staff following the tax changes announced in the last Budget which include at least a 600% increase in the taxable benefit.

Under the current rules, the taxable benefit where a van is available to an employee for private use, including private fuel, is:

  • £500 for vans up to four years old at the end of the tax year
  • £350 for vans over four years old at the end of the tax year
  • The employer has to pay 12.8% National Insurance on the benefit

    From 6 April 2005, the tax and employer's NIC charge can be avoided if private use is restricted to employees' home to work travel which is probably the main private use enjoyed by employees.

    From 6 April 2007, the standard charge for unrestricted private use will be increased to £3,000 from £500 (£350 for vans over four years old) with an additional charge of £500 for employer-provided fuel, regardless of the amount of fuel provided. The discount for older vans will also be removed.

    Those affected by the new rules will be employees currently taxed on the private use of their company van (or their employers if they pay the tax bill). The employer will find a significant increase in the existing Class 1A NIC cost which to many employers will be an unacceptable increase in costs.

    Mike Evans, director of remuneration & benefits at PKF, said: 'It is important that companies act now to implement new procedures to remove the tax charge and NIC cost from April 6, 2005. Failure to act now will result in a missed opportunity next year and could have huge cost implications for employers and employees from 6 April 2007.

    'The new £3,000 charge is a huge increase in cost for a relatively minor benefit enjoyed by many low paid employees.

    'Many employees, such as engineers and emergency call out teams, will be hit by this substantial tax increase and will question whether this 'perk' is worth having. Now is the time to consider restricting the private use of company vans to home to work journeys only.'
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