23 September 2011 by Parkers Team

  • VED Bandings are not based on CO2 emissions
  • Tax for vans registered before 2001 are based on engine size
  • Benefit-in-kind taxation is set at £3,000 – a £600 annual bill

If you thought van road tax was based on the same lines as car tax you'd be wrong.

You might reasonably conclude that road tax rates for vans are based on CO2 emissions levels as it is on cars but you’d be wrong because VED rates are based on very different criteria. 

If a van is registered before 2001 the road tax charge is based on engine size so from April 2011 engines of up to 1549cc cost £130 a year and those of at least 1550cc cost £210. Six-monthly rates are £71.50 and £115.50 respectively.

Euro4 vans registered between March 2003 and December 2006 are liable for £130 VED a year and £71.50 for six months and Euro5 vans are subject to the same charges. All vans registered outside of these dates pay road tax of £210 a year and £115.50 for six months.

Similarly tax rates for the private use of company vans do not mirror the system for cars. 

All vans with a payload of at least a tonne pay a flat rate benefit-in-kind of £3,000 which means a £600 annual tax bill for employees on the 20% rate or £1,200 for those on the 40% rate. Added to that is a free-fuel benefit charge of £500, which is taxed at £100 in the 20% band and £200 in the 40% band.

That all seems fairly straightforward but things do get complicated when you are trying to establish the difference between what is considered business and private mileage for employees using their employer’s vans. 

If the van is used mainly for making goods deliveries or calling on customers and the only private use is commuting, there is no tax to pay but if the employee uses that van for regular personal trips they will be liable for tax, usually collected through the Pay As You Earn (PAYE) tax code. 

If an employer considers that there is no tax to pay, they will need to keep sufficient records to show that the employee has the van mainly for work journeys and that private use is restricted to journeys between home and work. 

It’s not completely rigid though. A one-off trip to the dump or say, helping a friend to move is not considered taxable but then again you’ll be taxed if you take the van away on holiday. 

The tax charge is reduced if the employee does not have the van for the whole tax year, or if another employee also uses it for private travel. It’s further reduced if the employee pays something for their private use. The fuel charge is not reduced further unless the employee reimburses the cost of all fuel provided for private use. 

To prove exactly what the tax burden will be employers can asked their employees to keep mileage records, sign an agreement about the use of the van and have the use of the van put into a contract of employment.

The employer, if it considers an employee should pay reduced tax, must be able to show records of how its vans are shared. The employer must also record when the van has been off road for periods of 30 or more consecutive days if it wants a reduction and any contributions paid by employees towards private use of vans, and must supply proof that private fuel has been fully reimbursed.