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Tax-Free Company Vehicle

Company cars are becoming increasingly expensive from a tax and National Insurance point of view, especially if private fuel is provided. Moreover, the salary sacrifice scheme for taxable benefits for cars ceased in 2017.

 

In order to save tax, you should consider purchasing a company van instead.

CAR or VAN

Generally, a vehicle is considered a van if its primarily made for transporting goods rather than passengers. Therefore, a van is not restricted to transit-type vehicles for the purposes of the benefits code.

A double-cab pick up is effectively accepted by HMRC and considered as a van for tax purposes if it has unladen weight of at least one metric tonne. Similarly, certain Range Rover cars as limited models of Land Rover Discovery also qualify as ‘vans’.

A company van with private use is taxed according to a fixed amount. This is £3,350 for the van and £633 for fuel in 2018/19.

In order for it to be tax-free, you should only use the van for business purposes and for insignificant private use. HMRC guidance specifies that insignificant private use includes:

  • taking rubbish to the tip once or twice a year
  • regularly makes a light detour to drop off child at school
  • stops at newsagent on the way to work calls at the dentist on the way home

 

EXAMPLE

Mr France is considering buying a diesel car with CO2 emissions of 146g/km with a list price of £35,000, and some private fuel provision. The taxable benefit in kind for 2018/19 will be £11,900 and the fuel benefit will be £7,956.

On the other hand, provision of a Land Rover Discovery ‘van’ at fixed rates would save a higher rate employee £6,349.20 in 2018/19, as well as saving the employer £2,190.47.

 

In conclusion, a company ‘van’ is a cheaper benefit than a company car. Additionally, your company van can be tax-free if it is only used for business travel and insignificant private use.