Client has several employees who runs company vans. No private mileage is permitted even though vans are taken home (drivers go to different destinations each day and only to office to collect equipment etc). He has now fitted a tracking device to monitor any private use and intends to charge employee 40p/mile for any deviations. Does the van benefit apply and how it is mitigated by this mileage charge?
Simon Hall
Replies (6)
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Inconsistent
HMRC will ignore insignificant private use. Your client is prohibiting private use. That's fine, no van benefit arises.
Now your client is, by implication, permitting private use because he is going to charge for it. That is going to trigger a van benefit charge. Is the intention that the 40p is a penalty charge rather than a permissive charge?
I think a rethink is needed here, if van benefit is to be avoided (bearing in mind the amount is going up significantly).
Well spotted, Neil
The contradiction passed me by. Perhaps the 40p charge is to be applied to commuting travel only, with any other private use completely forbidden? Presumably that arrangement would not fall foul of the rules.
Insignificant?
There is no charge for ordinary commuting. This applies if the van is provided on terms that prohibit private use other than commuting, which would appear to be the case here. I understand that any other private use, if insignificant, will not necessarily breach this condition. Examples of insignificant use would be to call at dentist on way home or make regular short detour to pick up a newspaper. Weekly shopping trips would not be insignificant.
I don't believe there is any provision to 'exempt' private use via reimbursement to employer. The 40p/mile contributions will simply reduce the benefit charge by the smae amount.
From 6 April 2005!
Although the higher benefit charge does not kick in until April 2007, the exemption for insignificant use is effective from 6 April 2005 - ITEPA 2003 s.114(3A)