Van benefits

[Lee RG]

Hi

We have several staff with company vans, some use for private use and others not.

Those who do are taxed as a benefit on their P11D at the Van benefit rate and submit private mileage forms each month which is deducted from their salary to avoid them being taxed on the fuel as a benefit also.

My question is, for example some have used their vans for circa 2,000 in the last 3 months. At 9p per mile they have paid back £180 just in this 3 month period.
The Van fuel benefit charge is £669 and a basic rate taxpayer would pay £134 in a tax year.

Am I missing a trick here or does it not make sense in this instance not to pay the private mileage back and get charged for the fuel as a benefit?

Thanks

 

[Truemanbrown]

As you are know doubt aware, for 2021/22 the van benefit charge is £3,500 and the van fuel benefit charge is £669 which applies to employees who are provided with the van for private journeys.

You have mentioned that a basic rate taxpayer is paying £134. Obviously, you have not included the van benefit charge which would cost a basic rate taxpayer an extra £700.

There is also a Class 1A National Insurance liability of 13.8% that the company will need to settle. Therefore, the company will pay £483 for the van benefit charge and £92 for the van fuel benefit.

The first port of call is to look at what HMRC define as a 'private journey'. HMRC state that the following do NOT constitute a 'private journey' are:-

• business journeys – journeys the employee makes in the course of carrying out the duties of their employment
• ordinary commuting – travel to and from home to a place of work
• insignificant private use beyond ordinary commuting – for example making a slight detour to purchase a sandwich for lunch.

So the question you need to ask yourself will be is the amount paid back by employees for privae mileage going to be greater than the potential tax charge of £834 (see second paragraph)?

 

[Lee RG]

Thanks for the reply.

Yes I excluded the van benefit charge from my original comments as they are incurring this regardless of which method of treatment is chosen for the fuel.

I thought that ordinary commuting - travel to and from home to a place of work was classed as a private journey?

I was ensure if you could chop and change the tax method for fuel costs, i.e some employees choosing to be taxed as a benefit and some choosing to pay back private mileage and also if that could be amended throughout the year. For example if someone was clearly incurring more cost paying back the private miles they could change the method mid-year, be reimbursed the mileage and then be taxed as a fuel benefit?

Hoping the above makes sense, in my head it does...