Company vans have different rules to that of a company car. There are a few factors you’ll need to consider when purchasing a van including if you’ll be using it for personal use. Other vehicles, such as light commercial trucks and SUV’s also fall under the same criteria, and so, are treated as one of the same. This can make all the difference when calculating your company van tax.
If you only use your van for business then no tax will be applicable, however, if you also use this vehicle for personal activities, you must pay a Benefit In Kind (BIK) charge to HMRC. Don’t be fooled, this also includes minor journeys, though to what degree isn’t exactly well defined. HMRC determine the occasional trip to the shop or to pick up food as “insignificant private use” and won’t be subject to tax. So you can use this as a basis for your calculation.
The same also applies if you’re working as a sole trader or self-employed. As long as your van is used for business purposes only, then you’ll have no BIK tax to pay over.
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What Counts as a Company Van?
Before we can determine how much company van tax is applicable, you’ll need to understand if you’re vehicle even qualifies. It may sound like a simple question to ask, but as with any allowance, there are a specific set of rules and criteria that you must fall under for your vehicle to be seen as a company van. HMRC officially classify a Van as the following:
“Most conventional LCVs that weigh no more than 3,500kg and are used to convey goods.”
This does, however, leaves some grey areas in terms of other vehicles. As we mentioned above, most commercial trucks and SUVs are considered company vans, this is also the case for passenger vans with extra rows of seats. Though, smaller vans such as the Ford Fiesta might be deemed a company car.
The best thing to do if you’re unsure is check the vehicles V5C registration documents and look around for the European classification. If the V5 is labelled with M1 or M2, then your vehicle is treated as dual-purpose and must be taxed as a company car, which falls under the emission-based BIK rates. However, if it reads N1 or N2, then you’re safe to treat your vehicle as a van, subject to standard van tax. HMRC also have an in-depth guide on identifying a car derived van amongst other information.
Car-Derived Vans
A car-derived van is typically a small type of light commercial vehicle, and does exactly what it sounds like; operates as a van within a regular car. This is often accompanied by the rear row of seats being removed and replaced with a load platform in their place, and even the rear windows potentially being covered by solid panels.
There are a specific set of rules to follow for your vehicle to be classed as a car-derived van:
- Based on car designs, can be used as a regular vehicle.
- Weighs no more than 2,000kgs when fully loaded.
To use a couple of examples, the Ford Fiesta and Vauxhall Corsa are likely to be deemed as car-derived vans.
Dual-Purpose Vehicles
To add to the confusion even further, there’s a lot of car-derived vehicles, that can be used as a van from a commercial point of view. Some vehicles such as the Ford Double-Cab, have more than enough room to be used as a pickup but do have extra rows of seats compared to that of a traditional van, and so HMRC may define this as a van.
The general rule is that the area dedicated to transporting goods must be larger than the area dedicated to passengers and have more than 1,000kg of payload capacity. If you’re still unsure if your vehicle qualifies as a company van; HMRC has published a small handbook detailing different models of vehicles and their classification.
Company Van Private Use
Private use for a company van is typically self-explanatory. It is defined by the use of the company van for any activities or journeys outside of the scope of business. Employees are usually allowed to take the vehicle home as it can be used to drive to and from work, but anything in addition to this journey could be classed as private use. As we mentioned above, some small journeys such as a trip to the dentist, are often classed as insignificant private use, but that doesn’t mean you can use the company van over the weekend.
In some cases, if an employer has a strict “no personal use” policy in place for company vans, then if the employee in question breaks this rule and does, in fact, use the vehicle for private trips, this actually becomes an employment law matter., meaning the Benefit In Kind (BIK) charge is usually not triggered.
In more recent years, most vans are actually fitted with tracking software, it is essentially down to the employer if they wish to use this or not, but HMRC does state that you are legally obliged to report if the vehicle is being used privately. This is important to remember as this could be used against you if HMRC ever found any discrepancies in your reporting.
Do I Have To Pay Van Fuel Tax?
In some cases, employers pay for fuel costs of the company van, if this is also used for private use then tax will be charged. Similar to standard company van tax, there is a flat rate figure for the year. Unfortunately, even if your employer only pays for your fuel for a certain period within the year, the fuel tax is still paid for the full tax year.
Remember, this doesn’t apply to employees who only use their company car for business purposes and rack up no personal mileage.
The flat rate figure is currently set at £688 for the tax year 2022/23. This is calculated the same way as the company van tax above. So, for 20% taxpayers, you would multiply £688 by 20%, which produces an annual figure of £137.60. Broken down results in a monthly charge of £11.15.
Aside from using the company van solely for business use, some employees may also be exempt from the charge if they have a disability and the only private mileage is the journey from work to home. In this circumstance, the car would need to be adapted for the disabled employee.
Do I Have To Pay Van Road Tax?
Unfortunately, yes, you will need to pay Vehicle Excise Duty road tax, which is commonly known as VED. This is simply a tax that lets you drive your vehicle on public roads legally. Van road tax can be paid either annually or on a 6-month basis.
In the hope of making our world a greener environment, electric and low Co2 based emission vehicles are subject to lower rates, and VED isn’t an exception. The fewer emissions your vehicle produces the less VED you will pay, contrarily, the less efficient your vehicle is, the more you will have to pay.
Fortunately, calculating your van road tax isn’t all that difficult. Again, there are certain criteria you will need to meet that will factor into the amount of VED you will pay:
Vans registered before 01 March 2001
| Engine Size (cc) | 12 Months Tax | 6 Months Tax |
|---|---|---|
| 0 – 1549 | £170 | £88 |
| 1549 + | £280 | £145.75 |
Vans registered after 01 March 2001
| 12 Months Tax | 6 Months Tax |
|---|---|
| £275 | £143 |
The rules are slightly different if your company van is Euro4 or Euro5 compliant and registered between fixed dates. You can see the dates in question below:
- Euro4 Vans registered between 01 March 2003 – 31 December 2006: £140
- Euro5 Vans registered between 01 January 2009 – 31 Deecmber 2010: £140
- Electric Vans: £0
If you pay your Van road tax by Direct Debit on a 6-month basis, it is in fact cheaper to pay in a lump sum, as the monthly payment adds a little extra cost to the total.
Are Older Vans Exempt?
Typically, it depends on how old your company van is, but if your van is at least 40 years old from January of the current tax year, it will become exempt from VED tax.
If you’re one of the lucky few, you’ll have to apply for a special exemption through HMRC’s website.
Do Electric Vans Pay Tax?
If you’re using a pure electric company van you will be at an advantage over those using a traditional high-emissions van. Both company vans and company cars have a 0% BIK rate for the tax year 2022/23.
Using an electric company van also saves you company fuel tax, as the vehicle will run on pure electricity. Which, if you charge the vehicle at home, means you may be able to claim back some of the cost as a business expense.
What Doesn’t Count as a Company Van?
We’ve touched on what HMRC deem to be a company van and is subject to company van tax, but what do they specifically rule out? There are a select few vehicles that are excluded simply based on classification.
4x4s
The majority of 4x4s are designed for off-road passenger use, and therefore cannot carry a high load. The multi-purpose vehicles are built strictly for personal use, and so HMRC deems them to be a car, rather than a van. There are, however, a number of 4×4 models that could count as a van, as long as the criteria are met; again, you’ll have to use HMRC’s handbook to figure that out.
Minibuses
Minibuses are notoriously built to transport a large number of people from point A to point B, and not typically goods. Therefore, minibuses do not fall under the criteria of operating as a company van.
A Famous Case Study – HMRC vs Coca-Cola
If you haven’t already heard the news by now, back in 2020 there was a rather public case between HMRC and Coca-Cola. Coca-Cola were using 3 vehicles; 2 Volkswagen Kombis and 1 Vauxhall Vivaro, the problem HMRC had with this was that they believed the vehicles may need to be treated as cars, opposed to the company vans that Coca-Cola was claiming they were.
The battle went on until they eventually reached a decision. HMRC stated that the Kombis should indeed be classified as cars, leaving Coca-Cola liable to Benefit In Kind (BIK) and NIC charges, including the drivers themselves facing BIKs. This was later appealed but yielded the same result.
Coca-Cola took this even further, which unfortunately left them with all 3 vehicles being classed as cars in the end, only adding to their liability.
Granted, we don’t all have as much public exposure as Coca-Cola does, but it certainly shows how much of a grey area there is around company vans, and what should or shouldn’t be classified as one.
Conclusion
As always, you’ll need to do a little more digging to find exactly what your transportation qualifies as, not every type of vehicle has an instant classification, some are a little more complicated than others.
Make sure you use the resources in this article to ensure you’ve come to the right conclusion and are paying the correct amount of tax over to HMRC, you can always give us a call if you need any help.
It’s not just the employees that need to look out for the correct tax rules. Employers are also responsible for specific obligations when a company van is concerned. Employers must report any personal use over to HMRC, along with any fuel costs that are being covered by the business. You may also be liable to make Class 1A National Insurance Contributions.
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