Fleet News

Act now to avoid big tax increase

FLEETS are reminded to take action soon to avoid van drivers being hit with a massive tax rise when new rules come into force.

Changes in the law to close a loophole allowing drivers to avoid company car tax by driving vans could mean bill increases of up to 600%.

From April 6, the scale charge for unrestricted private van use will rise from £500 to £3,000, with an additional £500 charge for employer-provided fuel used privately.

Under these rules, basic rate taxpayers who choose to have unlimited private van use will pay 22% of £3,000, equal to £660 benefit-in-kind tax from 2007 – up from the current £110 a year – and a further £110 for using company-funded fuel privately.

The equivalent charge for 40% tax-paying van drivers will be £1,200 plus a £200 fuel charge. Employers’ National Insurance contributions will also soar.

HM Revenue & Customs says travel to work is not classed as private use, and that van drivers on their way to work can stop for a paper and a bar of chocolate without incurring a tax charge.

‘But taking the van to do the weekly supermarket shop or taking the family on holiday will incur a tax charge.

John McMinn, ALD Automotive’s LCV national sales manager, said: ‘Companies that have not already taken action should prepare a statement for drivers to sign.

‘This should amount to a signed declaration that they don’t intend to use their van for unrestricted private use if they take the vehicle home.’

Additionally, said Mr McMinn, companies should explain to van drivers the type of trips that are, and are not, allowed under the new tax rules.

Neil Addley, director of van sales website vansunited.co.uk, said: ‘The only way to avoid the increase is for drivers not to use the van provided by their company for anything but very occasional personal use and they should keep a mileage log book to show that this is what the rules call insignificant.’

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