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Changes to the Benefit In Kind taxation of vans … continued

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Company car or company van?
Van drivers who are allowed to use their vehicle for private use will in April 2007 face a sixfold increase in tax. If they have a choice over the type of vehicle, they need to reconsider the car option when they next change vehicle. Employers should also reconsider their vehicle policies for jobs which do not require large or heavy loads.

There are currently 1,700 cars which will be taxed less than a van after April 2007. The range starts with a Perodua Kelisa 1.0 litre EX with a BIK value of just £705 and stretches to many of the Astra, Focus and Golfs before exceeding £3000. The private use vandriver could reduce their personal tax bill by choosing any of these cars.

The breakeven point falls for each month in advance of April 2007 the switch takes place. For example, on a three year cycle, and new car in April 2006, the breakeven BIK value would be only £2167 (or a Corolla 1.4 VVT-I T2 ). Of course the choice will still depend on vehicle suitability, comfort, economy and looks, but the financial elements have changed dramatically.

The employer will have a different perspective based on efficiency, safety and running costs. However it is still time to review the borderline cases where a car could increase net employee benefits through less tax, greater comfort and the opportunity of more passenger use.

The decline of four-by-four double cab pickups?
Not yet. Self employed and non private use drivers will continue to be exempt from van tax after April 2007. The recent popularity of these vehicles has also inspired the manufacturers to line up new seductive models. They will be taxed at the equivalent of a medium sized car, so those drivers with private use and eligible for large cars will still save tax. Perhaps a few drivers who were initially seduced by the massive tax advantage in 2002 will now drift back to more comfortable, economical and faster cars.

Summary
The taxation of van drivers will remain simple because there is just one flat rate per year. Anyone faced with the choice of a car or van needs to calculate the very different tax liability of each car under consideration, and be sure to look at the tax amounts over the whole period.

Rupert Russell, is the publisher of www.comcar.co.uk, a specialist company car tax website which now has tools to compare tax on cars and vans.

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Annie Hayes

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