27-07-2020

HMRC have released information and draft legislation on the expected amendments to company van tax and benefit relief currently being enjoyed. The effect of these changes due to come in to effect from April 2021 will be on all business and employers who provide company vans which do not emit carbon emissions when being driven (zero emission vans) and employees who are provided with such company vans that are also available for private use and the restricted private use condition is not met.

The update in legislation changes existing legislation to reduce the van benefit charge (VBC) for zero emissions vans to £nil. Employers and employees have seen this benefit reduce over the last few years – currently for 2020/21 it is at 20% and will therefore represent a further reduction next year against full benefit costs VBC for zero-rated vans payable by an employee provided with a company van by their employer that can be used privately, except for what is substantially ordinary commuting.

The objective of the government is to incentivise the uptake of zero emissions vans and support the government’s commitments to achieving its ‘Road to Zero’ targets. Vans tend to do more mileage and be more polluting than cars. Transport is now the largest sector for domestic UK greenhouse gas emissions and a significant proportion of this is accounted for by road transport. At Budget 2014, the government announced the van benefit charge would be a percentage of the flat rate van benefit charge for conventionally fuelled vehicles until April 2020. These changes were legislated for in Finance Act 2015.

At Budget 2015, the government announced that the planned increases to the percentages for 2016 to 2017 and 2017 to 2018 would be deferred to 2018 to 2019 and the percentages would increase by 20% for each subsequent tax year reaching to 100% in 2021 to 2022. These changes were legislated for in Finance Act 2016.

At spring Budget 2020, the government announced it would reduce the van benefit charge to £nil for all company vans that emit no carbon emissions under any circumstances when being driven from 6 April 2021.

For more detail see here.


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