Company vehicles and private use

Titel

Publicatiedatum

28/07/2016

Categorie

Employee Benefits

Bron

HM Revenue & Customs

Aard

Nummer

Samenvatting

Where employees are provided with fuel for their own private use by their employees the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The fixed amount is currently £22,200. For example, in the current 2016-17 tax year a 150g/km CO2 rating would create a taxable benefit of £5,994 (£22,200 x 27%). The fuel benefit is removed if the employee reimburses their employer for all their private fuel use.

A company van is defined as 'a van made available to an employee by reason of their employment'. The standard benefit charge for private use of a company van is £3,170. The fuel benefit for a van with significant private use is currently £598. If private use of the van is insignificant then no benefit applies.

A van benefit charge also applies for zero emission vans. This rate is tapered and will increase each year until the tax year starting 6 April 2022, when a single rate will apply with no reduction for zero emission vans. This means that employees using zero emission vans for their own private use will be liable for the charge on a tapered basis until the full charge applies from 2020-21 onwards.

The remaining transitional steps are as follows:

2016-17 – 20% of the full rate
2017-18 – 20% of the full rate
2018-19 – 40% of the full rate
2019-20 – 60% of the full rate
2020-21 – 80% of the full rate
2021-22 – 90% of the full rate
2022-23 – 100% of the full rate

When the transitional steps are finished in 2022-23, the van benefit charge for zero emissions vans will mirror that of conventionally-fuelled vans. The van benefit charge for a zero emission van this tax-year is £634 (£3,170 @ 20%).

Van Benefit Charge for Zero Emissions Vans

Published 16 March 2016

Who is likely to be affected

General description of the measure

Policy objective

Background to the measure

Detailed proposal

Monitoring and evaluation

Further advice

Who is likely to be affected

Businesses and employers that provide company vans which do not emit CO2 by being driven (zero emission vans) and employees provided with such company vans which are made available for significant private use.

General description of the measure

The measure amends existing legislation to apply the level of the van benefit charge for zero-emissions vans at 20% of the charge for conventionally fuelled vans for the tax years 2016 to 2017 and 2017 to 2018. This defers the planned increase to 40% of the van benefit charge for conventionally-fuelled vans to 2018 to 2019. The van benefit charge for zero emission vans will be 60% of the van benefit charge for conventionally fuelled vans in 2019 to 2020, 80% in 2020 to 2021 and 90% in 2021 to 2022. From 2022 to 2023, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally-fuelled vans.

Policy objective

The objective is to encourage cleaner technology and less polluting vehicles by extending the support for the market for zero emission vans that was announced at Budget 2014.

Background to the measure

At Budget 2014, the government announced that the van benefit charge for zero emission vans would be a percentage of the van benefit charge for conventionally-fuelled vehicles until April 2020. These changes to the van benefit charge for zero emission vans were legislated for in Finance Act 2015.

Detailed proposal

Operative date

This measure will have effect on or after 16 March 2016.

Current law

Sections 154 to 159 of the Income Tax (Pensions and Earnings) Act 2003 provide for a van benefit charge. When a van is made available to an employee by reason of the employee’s employment and is also made available for private use other than for restricted private use. Where this is the case, the benefit of the van is treated as earnings from the employment. The benefit is subject to tax on the employee and Class 1A National Insurance contributions on the employer.

If the employee is liable for the charge, it is applied as a single figure. The charge is not dependent on the value of the van or the proportion of private use within the period it has been made available, unless it meets the conditions of restricted private use.

For the period 6 April 2010 to 5 April 2015, the legislation provided for a van benefit charge of nil for vans which could not, under any circumstances by being driven, produce CO2 emissions (zero emission vans). Section 10(2) Finance Act 2015 introduced a tapered increase in the level of the van benefit charge for zero emissions vans through applying an appropriate percentage to the charge applying to conventionally-fuelled vans, starting at 20% for the year 2015 to 2016. The level of the appropriate percentage is currently due to increase to 40% in 2016 to 2017; 60% in 2017 to 2018; 80% in 2018 to 2019 and 90% in 2019 to 2020 until the charge applying to conventionally-fuelled vans applies to zero emission vans in 2020 to 2021.

Proposed revisions

Legislation will be introduced in Finance Bill 2016 to amend subsection 155(1C)(b) to (e). This will have the effect of retaining the appropriate percentage of 20% for the tax years 2016 to 2017 and 2017 to 2018 and deferring further increases to the level of the appropriate percentage until later years.

Summary of impacts

Exchequer impact (£m)

2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

There would be no impacts arising from this measure on family formation, stability quality or breakdown or on family members’ ability to carry out family duties.

Equalities impacts

It is not anticipated that this measure will have adverse impacts on any group with protected characteristics.

Impact on business including civil society organisations

This measure supports the development and manufacture of zero emission vans in the UK by confirming preferential tax treatment of zero emission vans over conventionally fuelled vans. There is expected to be no impact on civil society organisations. Employer reporting and administrative requirements and costs would not significantly change.

Operational impact (£m) (HMRC or other)

This measure is not expected to cause increased administrative burden on HM Revenue and Customs or employers of company zero emission van drivers as part of the routine PAYE cycle.

Other impacts

Environmental impact: by slowing down the rate of the withdrawal of the relief, this measure will have a small beneficial impact on carbon emission compared to the previously announced policy. Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be kept under review through regular communication with affected taxpayer groups.

Further advice

If you have any questions about this change, please contact the Employment Income Policy Team on Telephone: 03000 521589 or email:employmentincome.policy@hmrc.gsi.gov.uk

Contents

Who is likely to be affected

General description of the measure

Policy objective

Background to the measure

Detailed proposal

Operative date

Current law

Proposed revisions

Summary of impacts

Exchequer impact (£m)

Economic impact

Impact on individuals, households and families

Equalities impacts

Impact on business including civil society organisations

Operational impact (£m) (HMRC or other)

Other impacts

Monitoring and evaluation

Further advice