Tax Penalties on Vans for Private Use

I was planning to bring this up at the Meeting at Sibson, and the idea was to present it in Powerpoint on the Saturay a.m. Those who were there are aware we adjourned to a lounge to carry out that day’s business and the were no facilities available.

Tax penalties for private use, including home to work or 1st call. Still deemed as private use. Known as P11d for vans.

1. At present, £500 if under 4 years or £350 if over 4 years. Equates to £2.12 per week or £1.48 per week. If you haven’t been declaring this, you’ve been lucky.

2. As from 05 April 2005. If the use is restricted for commuting only, there will be no tax penalties. If unrestricted use is granted, then the present penalties remain applicable.

3. As from April 2007 the rate of penalty rises to £3,000 plus the fuel allowance calculated as above. Worst-case scenario will equate to £14.81 per week.

If anyone chooses to opt out of the system, a form of disclaimer or statement will need to be issued by the employer. This is in the interest of both employer and employee to ensure a structure is adhered to. Any employee needs to ensure his boss is fully aware and be prepared to sign such a statement in order to prevent being penalised.

It is prudent to opt out the system early, being April this year, and then everyone is in the clear prior to the big change.

Tax on Company Vans – Changes from 6 April 2005 A fact sheet for employees.
From 6 April 2005, a lot of people will no longer have to pay tax on their company van. You will only pay tax if you use the van for private journeys other than journeys between home and work. If you are affected by this, please talk to your employer then get in touch with us so we can change your tax code to make sure you pay the right amount of tax.
What if I only use the van for work journeys?
If the only journeys you make in the van are work journeys – for example, delivering goods or making calls to customers – there is no tax charge.
What about journeys between home and work?
If you mainly use the van for work and the only journeys you make in it are work journeys and travelling between home and work, there is also no tax to pay.
How can I show there is no other private use?
Your employer must be able to show to the Inland Revenue that you don’t have to pay tax. This means you could be asked to
· keep mileage records
· sign an agreement about the van use
· have use of the van put into a contract of employment.
Other private journeys
If you do make other private journeys in the van, you will be charged tax for this. However, if this private travel is insignificant (like taking an old mattress or other rubbish to the tip once or twice a year) then you will still not have to pay any tax.
If you are charged tax, the amounts you will have to pay tax on (normally collected using your Pay As You Earn (PAYE) tax code) are:
Year Age of van Amount included in your tax code Tax at basic rate
2005/06 under 4 years £500 = £110 p.a. penalty
4 years or more £350 = £77 p.a. penalty
2007/08 all vans £3,000 =£660 p.a. penalty
Fuel for the van
If your employer lets you have free or subsidised fuel for private use, you will have to pay extra tax from 2007/08. For a basic rate taxpayer this will mean paying tax of around £110 p.a. on top of the £600.

Refer to website http://www.inlandrevenue.gov.uk/vans