Does it matter if my van is used for private mileage? Part 1
by Fiona Taylor
The short answer is yes! Yes, it does matter.
And it could be very costly if you don’t keep the correct records. As a business owner who runs company vehicles you need to be fully aware of the mileage and trips that are being done. Especially ones that are outside of working hours, private mileage. This isn’t just about the cost of fuel though, there is potentially another, much more expensive, issue that could have a huge effect on your business.
As an employer providing company vans and fuel to your employees, you have certain National Insurance and reporting obligations.
However, you don’t have to report or pay anything to HM Revenue and Customs (HMRC) if your van is used for business journeys or as a pool van.
Business journeys and commuting
A business journey is classified as a trip made as part of work (eg a service engineer travelling between appointments) or travelling to a temporary workplace.
Pool vans
You won’t need to report your van if it’s all of the following:
- available for use and used by more than 1 employee
- available to each employee because they need it to do their job
- not ordinarily used by 1 employee to the exclusion of others
- not normally kept at or near employees’ homes
- used only for business journeys – limited private mileage is allowed. However, only if it’s incidental to a business journey, eg driving home to allow an early start the next morning
Essentially the van benefit charge may be reduced to nil where there is insignificant private use or where private use is restricted. As a result, the private mileage rules for company vans differ to those for company cars.
For a company car driver ordinary commuting is treated as private mileage but this would be impractical for company van drivers. These drivers are normally required to take their vehicles home so they do not have to drive to a depot to collect their van before starting work. Therefore, commuting by company van drivers is not treated as private use, and as noted, insignificant private use is ignored when determining whether the van benefit charge should be applied.
Insignificant private use – HMRC has not defined the term ‘insignificant’ so its normal meaning, that is “too small or unimportant to be worth consideration” must be taken. HMRC considers that use of a company van should be regarded as insignificant if it is:-
- insignificant in quantity in the tax year as a whole – so, a few days at most;
- insignificant in quality – a week’s exclusive private use is therefore not insignificant;
- intermittent and irregular; and
- the exception to the general use of the van.
Therefore if an employee occasionally calls into the dentist on the way home from work or regularly makes a slight detour to call at the newsagent on the way to work, that would be insignificant private use. However if the employee used the van for each week’s supermarket shop that would not be insignificant.
To be exempt, you must tell your employee not to use the vehicle for private mileage and check that they don’t.
If your van isn’t exempt, you must:
- report the cost on form P11D
- pay Class 1A National Insurance on the value of the benefit
Vans used for private journeys
There’s a standard value of £3,150 that you’ll need to report. This can be reduced if:
- your employee can’t use the van for 30 days in a row
- your employee pays you to privately use the van
- other employees use the van – divide £3,150 by the number of employees
For full details on your responsibilities I suggest looking at the HMRC pages or speaking to your accountant/tax advisor.
See our other blog posts next week for how Satmo can help with your reporting for tax purposes.