For many tradespeople, work vans are one of their most important tools. Without them, they wouldn’t be able to get from site to site and get the job done. It’s essential! But, could improper use of this trusted vehicle actually, land you in financial trouble?
Well, in an age where everyone is cracking down, you could be in for an eye-watering fine if you’re not using your van properly. But what are these restrictions?
Well, in the UK, 99.8% of business-owned vans are on a ‘nil-benefit’ system. This system is chosen because it is simple and cost-effective. But, on a nil-benefit system, work vans can only be used to complete business trips, insignificant private trips and commutes. However, in a recent survey by vehicle tracking specialists ABAX, it was found that over half of employees who drive a vehicle for business purposes are unaware of HMRC regulation. And, consequently, are at risk of being hit with tax penalties.
So, here lies three major problems for businesses:
1. How can you stop your van fleet being misused?
2. What does the term ‘insignificant’ mean?
3. What happens if your drivers complete significant private trips?
Problem 1: How can you stop your fleet being misused?
When it comes to this kind of thing, it’s not up to HMRC to prove you are misusing your fleet of vans, it is up to you to prove that you are not! Therefore, HMRC recommends that you achieve compliance by:
1. Keeping a detailed mileage record of all trips.
2. Implementing an HMRC compliant vehicle policy.
3. Using a vehicle tracking system.
Problem 2: What does the term ‘insignificant’ mean?
HMRC provide a definition of ‘insignificant’ and some ‘real-life’ examples to make sure things are clear. They state that insignificant trips are, “too small or unimportant to be worth consideration” and give three examples of this:
1. Taking an old mattress to the tip a couple of times a year.
2. Making a slight detour to purchase a newspaper at a local shop on the way to work.
3. Calling in at the dentist on the way home from work.
Very subjective though, whether a trip is insignificant or not can be judged differently by an HMRC inspector in comparison to a driver. Don’t you just love a grey area? Therefore, it is recommended that the best thing is to be clear within the vehicle policy what trips can and cannot be taken!
Problem 3: What happens if your drivers complete significant private trips?
Let’s say that you have one driver who has been caught by HMRC completing significant private trips in a van that is not taxed to do so. They AND you now face a tax penalty, a penalty that can be backdated for up to 6 full years.
Well, you might want to duck and cover because one driver, completing unauthorised trips, could result in a total penalty fee exceeding £35,000! An eye-watering amount that will have a huge impact on any business.
So, if you might be a bit relaxed with this kind of thing then it’s a good idea to maybe start implementing some fixes. Because HMRC certainly isn’t backing down. Instead, HMRC has implemented a task force with the sole purpose of recuperating lost benefit-in-kind taxation. They are doing this by increasing their roadside vehicle checks and business records checks (BRCs).
One of their most effective methods is to take photographs of vans found in public carparks outside of usual business hours, and then compare these vans to the records of the business. Additionally, as HMRC continues to go digital, technology is shaping the way they do things and they are becoming more effective.
When it comes to these checks though, a lot of business fall short due to the sheer amount of information that HMRC need. To be 100% compliant, there are 14 pieces of information that HMRC require:
– Vehicle details including vehicle registration, make, model, fuel type and engine capacity
– The driver
– The trip date
– The trip start and end location including postcode
– The purpose (place/companies visited)
– The start and closing mileage
– Total business mileage
So it might be time to start implementing some tech to help aid you with this kind of thing and make sure you’re compliant!
But, what do you think of this? Let us know in the comments below!