Tax on "white van man" up by 400% in just two years
Drivers of company vans are paying four times as much tax as they were two years ago, according to statistics revealed by a leading accountancy firm.
HMRC clawed £40 million in tax from drivers of company vans as part of its crackdown on job perks, compared to just £10 million in 2006/07.
According to UHY Hacker Young, the huge rise in tax collected from van drivers follows changes to the rules on job perks introduced in April 2007 designed to increase the tax on the personal use of company vans.
Roy Maugham, Tax Partner at the firm said: “This tax increase has had a huge impact on small businesses, many of whom have been struggling with rising costs during the recession. Vans are an essential tool for many small traders and this tax hike has come at a time when other costs, such as fuel, have also risen sharply.”
“Small traders often economise on transport costs by using their business vans extensively for private use, so this tax rise has hit them hard.”
Under the old rules, for an employee making private use of a company van, the taxable benefit in kind was £500 (£350 for vehicles more than four years old). Under changes introduced in 2007 the taxable benefit for all vans was increased to £3,000, plus an additional £500 of taxable benefit if fuel is also provided by the employer.
This meant that employees paying tax at the 22% rate saw the tax they pay for the benefit of having vans and fuel going up from £77 to £770 for an older van and from £110 to £770 for vans under four years old. Employees paying tax at the 40% tax rate saw their tax go up from £140 to £1,400 for older vans, and from £200 to £1,400 for newer vans.
Roy Maugham added: “Businesses have had to review their policy as to who should receive vans and whether these should be restricted to just business use, but in practice the tax rise has proved very difficult to avoid.”
“HMRC is not giving drivers much leeway about what constitutes permissible private use of a van. It is very difficult for employees who are allowed to take vans home to avoid this tax charge. Using the van to pick up the kids at the weekend will almost certainly result in the van being taxed as a benefit.”
Posted July 16, 2010
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