Under the government’s new timetable, any changes to tax rates, allowances and benefits are now generally announced in conjunction with the Autumn Budget each year. This approach is designed to allow employers time to make the necessary changes to payroll systems in advance of the start of the new tax year.
In relation to company vans, the 2018 Autumn Budget announced that, from 6 April 2019, the flat-rate van benefit charge will increase from £3,350 to £3,430, representing a small increase in real terms to a basic rate taxpayer of £16 a year. In addition, the flat-rate van fuel benefit charge will increase from £633 to £655 from 6 April 2019.
In principle, a tax charge will arise if a work’s van is made available, by reason of the employment, to an employee or to a member of their family or household. It must be made available without a transfer of ownership from the employer to the employee. From 2016/17 onwards, the charge applies regardless of the employee’s earnings rate. If the van is only available for part of a tax year, the chargeable benefit will be reduced proportionately.
It may be worth noting that where a van is shared between two or more employees, the taxable benefit is calculated as normal and a reduction is then given for any periods during which the van is unavailable. To recognise that the benefit of the van is shared between more than one employee, a further reduction is then made ‘on a just and reasonable basis’. Discretion as to what constitutes a ‘just and reasonable’ proportion is generally left to the employer to evaluate, although HMRC may intervene if they suspect any deliberate manipulation of the rules.
The taxable amount of the van benefit will be reduced by any payments made by the employee for private use.
Changes were made to the taxable benefit charge provisions from 2015/16 onwards to phase out the former £nil van benefit charge for zero-emissions vans. For 2015/16 a rate of 20% of the van benefit charge for vans which emit CO2 applied to zero-emissions vans. The reduction is currently being phased out over several tax years until the van benefit charge for zero-emissions is equal to that for conventionally fuelled vans. The reductions are currently set as follows:
2018/19 – charge is 40% of van benefit
2019/20 – charge is 60% of van benefit
2020/21 – charge is 80% of van benefit
2021/22 – charge is 90% of van benefit
From 2022/23, the van benefit charge for zero-emissions vans is 100% of the van benefit charge for conventionally fuelled vans.
The Autumn Budget 2018 announced that the period for which 100% first-year allowances (FYAs) are available to businesses for expenditure on plant or machinery for electric vehicle charging points, is to be extended. 100% FYAs will be available for expenditure incurred up to and including 31 March 2023 for corporation tax purposes and 5 April 2023 for income tax purposes. The relief is subject to certain conditions, in particular, the expenditure must be on plant that is ‘unused and not second-hand’.
The benefit-in-kind charge arising on the private use of a work’s van remains relatively low in comparison to a company car. Given the current reductions in the benefit charge for zero emissions vans, and the immediate relief for capital allowances on charging facilities, businesses thinking of purchasing or changing their van/vans, may wish to consider opting for electric, or other zero-emissions, vehicles.