When you’re running a van there are some important things to bear in mind when it comes to the various sorts of taxation – here’s our quick guide to help you out. But remember, for accurate advice about your own circumstances you should always consult your accountant.
Capital Allowances
When you buy a van for business purposes, it’s possible to claim up to 100% of the cost against your business profits (therefore reducing your tax liability). It’s not totally straight forward and can be affected if the vehicle is used partially for private use by sole traders / partnerships. To clarify how this affects you, consult your accountant. It’s important to note that, if you operate a vehicle under a contract hire agreement (or lease) where the van doesn’t actually belong to you, there are no capital allowances.
VAT
If you use your van purely for business purposes and you’re VAT registered, you can usually reclaim the entire VAT element you paid on purchase or with the hire purchase deposit. In the case of a lease, the monthly VAT paid with the rental is reclaimable. However, this brings up the question of ‘what is a van’?
Defining a van for taxation purposes
Under normal circumstances, a commercial vehicle up to 3.5 tonnes gross vehicle weight with no side windows to the rear of the driver and clearly designed primarily for the carriage of goods would be classed as a van. Where it gets tricky is when it comes to double cab pickups, and Combi (double cab) vans…
- Double cab pickups such as the Mitsubishi L200 and Nissan Navara have rear passenger seats and side windows. Providing that the payload of the vehicle is over 1000kgs (after permanent additions to the vehicle such as hardtops, roller covers and towbars have been fitted) HMRC normally treat the truck as a commercial vehicle. However, with the Ford Ranger Raptor the payload is substantially less and VAT would not be recoverable.
- Combi vans with a second row of seats and side windows are a very grey area. Previously, providing the load area was larger than the seating area and the payload was over 1 tonne it would have been considered a van. A recent court case has now thrown this into doubt and you would be strongly advised to check with the van manufacturer and HMRC before committing to a purchase.
Benefit in kind
Using a company van as a private vehicle is treated as a taxable benefit, just as with a car. You’ll pay a lot less though, as there is a fixed rate applied rather than the variable car structure which uses list price and CO2 emissions to generate a value. For 2020/21 the rate is £3430. A 20% taxpayer could therefore pay as little as £57 per month in tax for using a top of the range Mercedes-Benz X-class pickup…
Vehicle Excise Duty (or road tax)
All vans registered after 1st January 2011 pay the same VED rate of £265 for 12 months – unlike cars it does not vary depending on CO2 emission level. Owners of older vans pay less.
So that’s our guide. And one last reminder, before committing to anything, always double check with your accountant!