The Inland Revenue is asking employers to prepare now for the introduction of the new van scale charge rules from April 2005. Many employees who are currently paying tax for private use of their company vans will no longer have to pay tax from the start of the 2004/05 tax year. However, unless the tax office is given details of those employees, their tax codes for 2005/06 will continue to reflect the tax charge.

From April 2005, there will no longer be a tax charge for the provision of a company van that is available for private use if

• the only private use of the van is to commute from home to work, or
• any private use other than commuting is "insignificant".

The term "insignificant" is not defined in legislation and the Inland Revenue suggests that it take its normal English meaning. For example, the New Oxford English Dictionary defines it as "too small or unimportant to be worth consideration". On this basis, the Inland Revenue has given some examples of how the term is to be understood.

Examples of insignificant use would be where an employee

• takes an old mattress or other rubbish to the tip once or twice a year
• regularly makes a slight detour to stop at a newsagent on the way to work
• calls at the dentist on his way home.

Examples of use that is not insignificant would be where an employee

• uses the van to do the supermarket shopping each week
• takes the van away on a week's holiday
• uses the van outside of work for social activities.

Using this guidance, employers should decide now whether, for the 2005/06 tax year, the provision of a company van will continue to be a reportable benefit. If not, the employer should inform the tax office as soon as possible and not later than the start of the Inland Revenue's re-coding exercise in January 2005, providing the employer's reference number and the names and NI numbers of all van users for whom their will be no van scale charge for 2005/06.

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...back to 24 September 2004

Sources:
www.inlandrevenue.gov.uk/employers/van-tax.htm