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BIK on a Van if no obvious business use?

BIK on a Van if no obvious business use?

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I am FD of a small business (20 people, 1 other director). I commute c. 30,000 miles per year.

Can I purchase and run a small van through the company and use it solely for commuting and avoid BIK? I am aware of both the definition of a van and the rules about occasional private use.

My concern is that I cannot provide a de facto business reason for the company to own a van! Does this affect either my BIK or the company's CT or VAT positions?

Van Driving FD

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By Elenderil
01st Jun 2007 16:30

I agree
It seems that there is no bona fide business motive in allocating a van to Van Driving FD. Assuming that you are thinking in terms of something fairly luxurious (twin cab?) rather than a transit or fiesta van type of vehicle the tax and NIC saving over a similar car variant is still signficant.

On the other hand if you are thinking of a cheap van take into account that a number of small - medium cars are available that generate a smaller benefit charge than the standard £3K scale charge for a van. Of course this then swings back in favour of a van when the private fuel scale charge is taken into account.

It all depends if a reasoned case can be put togeter as to why an FD should have a business need for a van. If it can than free commuting awaits you, if not the fixed scale charges on a Van are still a relatively cheap option.

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By Anonymous
31st May 2007 11:04

Thanks for your comments so far.
To confirm, the 30,000 miles is all travel between home and office. I do very few business miles.

Can anyone shed any more light on VAT - if I claim input tax on purchase and running costs, do I have to calculate output tax on my private use (even though that private use is not subject to income tax as a BIK!)? If so, how do I do that? I could make a good guess at apportioning VAT on running costs, but what about the VAT on the purchase price?

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By Chaztax
31st May 2007 15:01

Two separate requirements
Following the last point, I also think that getting a company van purely for commuting WILL lead to the £3k BIK.

The point is that there are two SEPARATE requirements contained in s.155(4) ITEPA 2003 and BOTH need to be satisfied in order to avoid the BIK.

(a) The commuter use requirement - this basically states that the van must not be available for private use other than ordinary commuting.

(b) The business travel requirement - this states that the van must be available mainly for use for the employee’s business travel.

On the facts given by Van Driving FD, condition (a) will be satisfied but not condition (b) since the van will be available mainly for commuting, not mainly for business travel.

The fact that commuting is (in a manner of speaking) exempted from counting as private use for the purposes of requirement (a) doesn’t make it into business travel for the purposes of requirement (b).

See also http://www.hmrc.gov.uk/manuals/eimanual/EIM22805.htm

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By AnonymousUser
31st May 2007 13:10

Paul, I dont follow your argument
It seems to me that the van would be made available under s114 of Itepa, which leads us to ss 154-9. The business travel requirement of the restricted private use condition (s155) would not be met, so the commuting element of the test need not be considered.

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By AnonymousUser
30th May 2007 17:33

To avoid the BIK the business use requirement must be met
However the BIK will be modest for the amount of commuting you envisage. I dont see a problem with Corp Tax.
For vat it will be necessary to account for output tax on the use of the van.
Get a comfortable one!

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By AnonymousUser
30th May 2007 22:21

Modest ?
If the van has private use there is BIK. If the 30,000 mile is private use this is not modest either, but we do not know enough about what the employment is to be any more helpful. I assume the alternative mileage payment system using own vehicle has been considered & priced, but If not, why?

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By Paul Soper
30th May 2007 22:58

Not so fast fellows
Where there is a provison of a van journeys of commuting from home to place of employment are specifically NOT ordinary commuting and so do NOT give rise to a taxable benefit. So if the van was used privately only for those journeys there would be no benefit - and if there were no business use either it wouldn't seem to matter at all. This is why the the 'double-cab pickup' became so popular and the £3,000+ benefit was introduced - too many people were taking advantage of the £500 benefit. The business reason for owning the van is tyo allow you to reduce your personal tax liability and the company to reduce its exposure to a liability under Class 1A. Anyway if you've got 21 other people involved I am sure there must be the odd occasion when books, records, or paper or other consumables have to be transported.

Provided you can show evidence that there is no significant private use - and a board resolution to forbid it would be advisable (see the VAT case concerning Elm Milk Ltd) you can drive 30,000 tax-free miles a year - provided it is in a van.

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