Pictured: Andy McQuillan, Tax Partner at Dains

Dains, Midlands based Chartered Accountants and Business Advisers are warning that HMRC is increasing its monitoring of the use of company vans amid concerns that insufficient tax and NI contributions are being collected.

When a company van is used for private journeys, it creates a benefit in kind charge of £3,000 per annum. However, HMRC is concerned that the rules regarding vans are not as strict as those for cars, particularly as private use of vans can be considered 'insignificant' and therefore tax-free.

Andy McQuillan, Tax Partner at Dains said: "The legislation states that there is a nil benefit in kind charge if the employer prohibits private use other than for the purposes of commuting or if the use of the van is truly 'insignificant'.

"There is no definition of 'insignificant', but it can broadly be described as 'ad hoc'. For example, making a slight detour to pick up a newspaper could be described as such, but doing the weekly shopping or going on holiday in the van could not."

HMRC has now issued questionnaires to a number of employers concerning all aspects of company van use, asking questions such as whether the employer has a van policy or whether mileage tracker devices are fitted.

If HMRC discovers that there is more than insignificant private use, it is likely to try to collect tax and NI contributions for earlier tax years as well as the current one. HMRC will seek collection of the tax underpayment from the employer rather than the employee, as it is the employer's responsibility to operate the rules correctly.

As a separate matter, in these straightened times employers can take other steps to remunerate their van drivers slightly more tax-efficiently, if they tend to spend at least five hours a day away from their place of work and incur meal costs. HMRC has agreed tax-free subsistence rates for reimbursing such employees.

Employers with larger van fleets in particular can make significant tax and NI savings by introducing such payments as part of the remuneration package.

For more information please contact Andy McQuillan on 0845 555 8844 or email tax@dains.com.