Correct calc for Company Van BIK for personal use?

Calculation for repayment of personal use

• Avoiding Irish Customs Charges/duties for consumer

Hi

Can I check I an correct in my calcs and assumptions for a company van

Company van used by a director for personal use - company pays lease costs and all fuel costs - van is available for personal use at all times

Van BIK charge £3600

Fuel BIK charge £688

Total BIK £4288 @ marginal rate

If he keep records of mileage an repays 100% of personal mileage and repays company at advisory rate (which for the van is 16p per mile currently) - he does not have to pay the Fuel charge BIK element - correct?

If total milage is 12000 and he does 3000 personal he could pay the 25% of the Van element privately to the company (£900) to avoid the Van BIK charge? - is that correct and is this a reasonable method of calculation?

thanks

Replies (7)

By Bobbo
29th Jan 2024 12:43

hairyfingers wrote:

If he keep records of mileage an repays 100% of personal mileage and repays company at advisory rate (which for the van is 16p per mile currently) - he does not have to pay the Fuel charge BIK element - correct?

Are you suggesting he repays the company £480 (3000 * 16p) to avoid tax on £688?

hairyfingers wrote:

If total milage is 12000 and he does 3000 personal he could pay the 25% of the Van element privately to the company (£900) to avoid the Van BIK charge? - is that correct and is this a reasonable method of calculation?

I don't think that is correct.

Thanks (1)
By Ruddles
29th Jan 2024 12:45

There are no advisory rates for van fuel so another method of calculating the cost of private fuel will be needed. But you are otherwise correct - if the full amount is made good, no fuel BIK should arise. EDIT - but as pointed out above, does he really want to pay more than the tax charge itself?

But you are wrong re the van benefit. Contributions for private use will only reduce the BIK on a £ for £ basis. Think it through and you should see why that is so.

Thanks (1)
By hairyfingers
29th Jan 2024 13:29

thanks re the Fuel element. I can get them to calculate the actual fuel cost over a period of time/number of miles and use that if necessary. The mileage quoted is just for example purposes I don't yet have the actual figures, we're just setting up the payroll and working out possibilities - but yes, if less tax charge he wouldn't refund

re the reduction - yeah I have tried to work it through but it doesn't make sense so I must be misunderstanding:

BIK value is £3600 per annum at marginal rate so @ 20% tax = £720 tax paid

If he contributes £ for £ he would need to pay £3600 to eliminate the tax charge in full - but why do that if that total tax charge is only £720. that's why I thought it would be a reasonable method to track personal use and pay that personal usage pro rata the £3600. Or are you saying pay back the tax payable £ for £ in which case he's just paying the tax amount regardless? sorry for my dimness

Thanks (0)
By Ruddles
29th Jan 2024 13:46

hairyfingers wrote:
If he contributes £ for £ he would need to pay £3600 to eliminate the tax charge in full - but why do that if that total tax charge is only £720.

Exactly - no-one in their right mind would do that. There is a general principle involved with BIKs (and other similar items, such as employment-related securities) - it is usually better (for the employee) to pay the tax on the value of something than pay the value of the something to avoid the tax.

As I said, think about it. The £3,600 is not mileage-dependent - it is the charge for driving 1 private mile or 100,000 private miles. In your example, there is a £3,600 charge for driving 3,000 miles. It doesn't matter if business mileage is 1 or 100,000. If he wants to eliminate the £3.6k benefit, ie a tax charge of say £720 then he would indeed need to pay £3.6k.

Thanks (1)
By hairyfingers
29th Jan 2024 14:21

OK that's great- it's not intended to be made good - you pay tax on £3600 for access and if you don't you'll end up paying more.

Thanks (0)