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V-Sol >> Home >> Vehicle Tracking News >> ew company van taxation rules: How Vehicle Tracking Systems can help
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New company van taxation rules: How Vehicle Tracking Systems can help

This month the Inland Revenue starts collecting increased taxation for private use of company vans as the Benefit In Kind (BIK) value increases from £500 to £3500. Managers of field service fleets will have to show compliance and vehicle tracking company V-SOL Limited have reports and advice on how to do it.

The impact of these changes will be huge: every van driver will be up to £100 worse off a month and companies will likely have to compensate drivers for this increase in tax payments.

What's more employers are liable for NI contributions on the Benefit In Kind value, which means a bill of £448 per driver per year (where fuel is provided). With compensation for reduced net pay taken into account, employers could face bills of £1,294 for lower rate tax payers and £2,448 for those on the higher rate.

For those organisations that decide not to allow private mileage, there are significant obligations in terms of record-keeping. Those allowing private mileage, or having written private usage into employee contracts, will face a hefty bill.

The burden of proof for the Inland Revenue is placed squarely on employers. Businesses will have to keep mileage records that prove every van in the fleet has been used purely for work-related journeys. For example, a Tax Inspector may have seen a company van in a supermarket car park on a Saturday afternoon. The company will need to be able to prove that this was either a business journey or that the employee did not use the vehicle to go to the supermarket regularly at weekends. Journeys to and from work are permitted, as is the odd 'exceptional' journey - for example using a company van on one occasion to help a family.

It becomes the company's responsibility to implement processes to capture, review and approve data on vehicle activity, and then store it for at least six years. Without the right technological support, this can be difficult to execute, as manual records are cumbersome to compile, work through and then store.

Vehicle Tracking solutions collect all of this data automatically and create reports that can be emailed on a weekly basis for verification (and storage). Detailed reports can highlight any journeys that fall outside the rules and then be passed to the employee for verification/clarification. Journey routes can be viewed at any time to verify locations, and vehicle tracking can be used to validate or even replace manual timesheet processes. This helps satisfy the requirements of the Inland Revenue with minimal effort on the part of the business.

If you don't include fuel, then you do reduce the level of tax liability, but you also take-on a burden of proof, as you must be able to differentiate between business and personal use. Vehicle tracking can provide the information needed to make calculations for fuel usage that needs to be charged, or validate claims from drivers.

Van drivers with full private use privileges as part of their contract - including fuel provision - will have the full tax liability. This means that businesses need to find an additional £1000+ per driver per year to offset the liability. Mileage records do not have to be kept for the IR, but there is a large increase in costs that has to be addressed.

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