This guide is designed specifically for businesses and their fleet managers, if your drivers are looking for more information on company van tax then you can direct them here.
We’ve also got a separate guide for company car tax and how you need to factor this into your business’ decisions.
What is Company Van Tax?
Company van tax is a tax that employees and employers pay on a van that is owned or leased by the business and available for an employee to use for private travel as well as business travel.
The amount the individual will pay varies based on their individual tax rate and you can find more information about that here.
The amount that your business will pay is explained below.
What Classes as a Van?
A van is legally defined as a vehicle primary constructed for the conveyance of goods or burden of any description that does not have a gross vehicle weight exceeding 3.5 tonnes when fully loaded.
In order for car-derived vans to be classified as a van they will need to have their rear seats, seatbelts and mountings removed, have a floor panel fitted and have opaque rear windows.
Company Van Tax and Pool Vehicles
If you offer a pool van to employees then you won’t need to pay tax on this provided that the below conditions are met.
HMRC advise that:
- A pool van must be available to more than one employee
- A pool van is available to each employee because it’s required to do their job
- A pool van is not exclusively used by one employee in general
- A pool van is used for business journeys
- A pool van is not normally parked by an employee’s home
If your van is not a pool vehicle then it might be exempt if it is only used for business purposes. Otherwise, you must report the cost on the P11D form.
You will still need to report a van if it is funded through a salary sacrifice scheme, though if the cost of the van and fuel, if offered, is less than the amount of salary the employee has given up then you should report the salary amount instead.
As well as reporting the vehicle on the form P11D the business will also need to pay a Class 1A National Insurance on the value of the benefit.
For the tax year of 2021/22 the current Benefit in Kind (BIK) rate for light commercial vehicles, which includes vans, is a fixed amount of £3,5000.
There are lower rates on offer to the business if an employee can’t use the van for 30 consecutive days, or your employee pays to use the van privately.
In What Situations is Company Van Tax Not Paid?
As mentioned you will not need to pay company van tax if it is a pool vehicle or if it is only used for business purposes.
Company Van Tax on Electric Vans
If you have a fully electric van then you will report this on the P11D at 0% of the rate which means £0.
However, you will still need to pay Class 1A National Insurance contributions if a van is a hybrid, whether it is a plug-in or not.
Are There Ways to Reduce Company Van Tax?
Choosing electric vehicles means you won't have to pay a P11D contribution on the vehicle which reduces the overall amount you'll pay for the vehicle. However, you will still need to pay a NI contribution
What Type of Businesses Pay Company Van Tax?
All businesses will need to pay company van tax on any vans that are not exempt as per the above examples.
Company Fuel Tax for Vans
Just like with the van itself there is a flat BIK rate that you will need to report to HMRC if you offer your employee fuel, for example via a fuel card, for private travel in the vehicle. This is currently set at £669.
This amount can be reduced if the van is unusable for 30 consecutive days, you stop providing fuel during the tax year or your employee repays you for their private fuel.
For more helpful guides head back to our business guides homepage, including our guides to leasing a van, food and fridge vans and business vehicle signage. Or if you'd like to speak to one of our team for more information give us a call on 01722 322 888.