Revenue drives up tax for private use of vans

New benefit-in-kind rules due to come into effect next April will see a massive hike in tax liabilities for employees who take their employers’ vans home at night.

Currently, the annual tax liability on an employee using a company van for their own purposes is £500, but from April 2007 this rises to £3,000. Vehicle leasing specialist LeasePlan said this means for an employee paying 22% tax, the cost will rise from £9 to £55 per month.

LeasePlan is urging companies to start discussions with their employees now and is outlining three possible courses of action.

The first option is for employers to compensate employees for the additional tax, but LeasePlan calculates that this would mean adding around £1,000 (gross) to the salary of each van driver.

A second option is for employees to use the vans more "to get their money’s worth", which will increase maintenance bills and shorten replacement cycles.

The final option is for drivers not to take their vans home at night and weekends. While the tax and maintenance costs remain unchanged, employers will need to provide secure overnight parking for all their vans and potentially for parking for their employees’ cars during the day.

Andy Riseborough, proprietor of Cambrian Plant Hire, said his operators park their vans at the depot overnight but this can add considerable time and mileage to the individual’s working day, as well as posing logistical and parking problems. He said drivers increasingly want to use their own cars and be reimbursed for fuel, or ask for a fuel card, which has its own tax liability.