A tax charge may arise under the benefit in kind legislation where a company van is available for an employee’s private use. If fuel is also provided for private journeys, a separate fuel benefit tax charge arises. The van and fuel benefit charges for 2023/24 have now been announced.
Van benefit charge
The van benefit charge only arises if the company van is not an electric van and private use of the van is not limited to home-to-work travel. The amount is set each tax year and increased in line with the increase in the consumer price index. The taxable amount is £3,960 for 2023/24, up from £3,600 for 2022/23. The rise means that a basic rate taxpayer will pay £792 a year in tax and a higher rate taxpayer will pay £1,584 on the benefit of their company van for 2023/24.
Restricted private use
It is possible to have a company van and to use it for home-to-work travel without incurring a tax charge as long as the ‘restricted private use’ conditions are met. This test has two parts – the ‘commuter use requirement’ and the ‘business travel requirement’.
The commuter use requirement is met if the terms on which the van is made available to the employee prohibit private use other than for ordinary commuting journeys or journeys that are substantially the same. Ordinary commuting is normal home-to-work travel. In addition, the employee (or the employee’s family) must not have actually used the van for private use other than for ordinary commuting.
The business travel requirement is met if the van is made available to the employee mainly for business use.
If this test is met, the van benefit charge does not apply.
The charge for an electric van is nil. Consequently, employees with electric company vans can, where permitted to do so by their employer, use their company van for unrestricted private use without any associated tax charge. This makes an electric company van a tax-free benefit.
A separate van fuel charge applies if a van charge arises in respect of the van and the employer meets the cost of fuel for private travel. This is set at £757 for 2023/24, up from £688 for 2022/23. Consequently, the perk of ‘free fuel’ will cost a basic rate taxpayer £151.40 in tax for 2023/24. For a higher rate taxpayer, the tax cost is £302.80.
There is no charge if fuel is provided for home-to-work travel and the restricted private use requirement is met. Likewise, there is no charge if the employer meets the cost of electricity for private travel in an electric van.
Partner note: ITEPA 2003, s. 155(1); 161(b).