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New rules re vans

New rules re vans

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With the new benefit rules for vans rising to £3500 from 6th April 2007 I envisage a major problem as it will be difficult for the majority to keep the mileage logs necessary.....

One option is to sell vans to director and claim mileage.... vat would have to be paid on selling price and money or an entry to directors loan account would have to take place I presume.......

Would you claim 40p per mile on first 10000 miles as a car? also if you have a car would you be able to claim 10000 on each vehicle or is it on the person?

What are other accountants advising? Thank you
MICHAEL B

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By neileg
02nd Mar 2007 11:24

Mmm...
I would have thought that a BIK of £3,500 was a pretty good incentive for keeping a mileage log!

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By Chaztax
02nd Mar 2007 11:34

AMAPs
Just to answer Michael B’s third paragraph: The approved mileage allowance payments apply to vans as well as cars.

The 10,000 miles limit is the total mileage travelled IN ALL VEHICLES in relation to the employment during the tax year. It is not 10,000 miles per vehicle. See s.230(3) ITEPA 2003.

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Euan's picture
By Euan MacLennan
02nd Mar 2007 14:13

I don't understand the question
If the company sells the van(s) to the director, then he (and any other drivers) will certainly have to keep mileage logs in order to claim the mileage allowance from the company. But there is no point in keeping a mileage log if the vans remain owned by the company.

If private use is purely incidental (commuting from home to work, annual trip to the tip, etc.), there is no benefit. The company can make rules in the contracts of employment to prohibit private use and ensure that the vans are genuinely for business (sign-writing, full of tools and materials) so that the driver would not want to use them privately. So, no benefit and no mileage log.

Alternatively, if the van is a trendy double cab pick up, the director can just accept that it is available for private use, in which case the benefit is £3,000, plus £500 for fuel if also provided for private use. It will cost him tax at 22% or 40% of £3,000(+500). If he contributes for private mileage, it will cost him 100% to reduce the benefit to nil, so he would be losing out by 78% or 60%. So, accept the benefit, but still no need for a mileage log.

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By Anonymous
02nd Mar 2007 15:52

Thanks but.....
Euan...... I do not believe that entering a contract term stating no private use in respect of a one man band limited co will be enough.... full mileage logs will need to be maintained itemising every mile...... rather than mileage claim only on business miles which will be easier to keep and less dangerous in my opinion when you are talking about £1400 per year lost tax (40% taxpayer).


I see this as the next big line of attack in the future?????/

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By Anonymous
02nd Mar 2007 18:09

Mileage logs recommended
I've recently guided a client through a PAYE (& CIS) records inspection.
There was a company van (very clearly commercial, not a double-cab recreational vehicle).
The director owned a personal car.
No BIK declared as, per HMRC published guidelines, immaterial private use (work from home).
No mileage log maintained.
HMRC accepted that there was no BIK based on explanations provided but suggested that it was a good idea to maintain a mileage log.

I don't think there's any requirement in tax law to keep a mileage log, it just helps prove the point if challenged, as how else could the point be decisively proved ?

In the absence of a mileage log it's a matter of arguing the point, the following factors will be helpful (as were present in my client's case) :-

1. The "van" is of a design NOT lending itself to private use
(a double cab pick up gives the appearance of being a
recreational or private use vehicle so more of an issue)
2. It can be demonstrated that there's a private vehicle available
for private use

In those cases where the employer / client wants to maintain that a double cab pick up or similar has no private use I'd be more strongly recommending a mileage log than with a "plain" white van (or red in my client's case).

To sum up, I recommend a mileage log be kept, especially so with a double cab pick up.

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Euan's picture
By Euan MacLennan
02nd Mar 2007 18:17

One of us is missing the point
How is it "easier to keep" a log of business miles to support a claim by a van-owning employee for mileage allowance than it is to keep a log of business miles to support a claim that a company van is never used for private purposes? If your "full mileage logs [which] will need to be maintained itemising every mile" reveal just one non-incidental private mile, your employees will cop the full benefit charge.

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By neileg
05th Mar 2007 14:00

As I remember
In the run up to the start of self assessment, there was a lot of publicity about the need to keep appropriate records and keeping mileage records one part of this list. Now I don't know what statutory authority liay behind this, but you can't say this is a new idea.

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