COMMERCIAL VEHICLE TAX WARNING ISSUED
Posted on 12th August 2019 at 13:57
Companies and commercial fleet drivers are being warned not to repurpose car-derived vans into car-like vehicles to try to make savings in Benefit-in-Kind (BIK) and vehicle taxation.
The theoretical tax savings are clear to see. As a van, the vehicle qualifies for:
Full VAT recovery for outright purchases.
Full recovery of VAT on lease rentals.
100% offset of lease rentals against corporation tax.
BIK scale charge of £3,430 for a van with private use in the current tax year.
National Insurance Contributions (NIC) based on scale charge.
Based on the scale charge, a 20% tax paying driver would have a tax bill of just £686 per annum with £1,372 for a 40% tax payer. There is also a flat rate van fuel benefit charge of £655 for the same tax year.
A comparable company car will have a BIK tax bill many times greater than a van, with only 50% of the VAT on leasing rentals being recoverable and NIC paid on the vehicle’s full scale charge based on its P11D value.
As a result, some companies may be tempted to acquire a van and then repurpose it with rear seats, while still claiming it as a van and paying the appropriate van tax rates. HMRC has a strict set of criteria that qualify a vehicle as a light commercial or car-derived van rather than a passenger car.
HMRC classifies a vehicle as a van where:
The rear seats, even easily removable ones, and seatbelts have been taken out, along with their mountings. It is not enough to merely cover them over or fill in holes with a non-metal cold substance, which can easily be removed later.
Examples of suitable methods of disabling are welding up the bolt-holes or fitting bonded shear-bolts.
The rear area of the shell is fitted with a new floor panel to create a payload area
The vehicle’s side windows to the rear of the driver’s seat have been made totally opaque.
The mechanism for raising and lowering the windows in the rear side doors, where applicable, has been disabled or removed.
For any further information with regards to this or anything motor finance, please contact the office on 01482 858800 and we’ll be happy to assist.
Share this post: