VAN TAX : THE FACTS

From 6th April 2007 BIK tax is changing.
We'd like to keep you up-to-date with changes to BIK tax regulations and show you how driving a Mitsubishi commercial vehicle can save you up to £2,800 on tax payments compared to an equivalently priced vehicle.

Benefit in Kind (BIK) - From 6th April 2007

• If you drive an L200 for unrestricted private use then your BIK liability increases to £3,000 x your marginal tax rate as from the 6th April 2007. This means that if you are a 40% tax payer you would actually pay only £1,200 in tax (a 22% tax payer would pay just £660).
• If your employer provides your fuel to include unrestricted private use, an additional BIK liability of £500 will apply. The actual tax payable is calculated as above i.e. a 40% tax payer would pay only £200 (a 22% tax payer would pay just £110).
• Employees who use an L200 for business purposes only (and do not use the vehicle for private purposes) have no tax liability.

Vehicle and Fuel BIK Comparison Table

 * Business milage may be reclaimable at up to HMRC approved rates
† Based on 21% charge for Ford (18% plus 3% diesel surcharge) and 30% charge for Nissan
   (27% plus 3% diesel surcharge) of £14,400 fuel BIK fixed figure.

As you can see in the table, if we look at the annual tax payable between a pick-up and an equivalent 2.0 litre passenger car or SUV with a similar retail price you can potentially save between £861 and £3,427!

SOLE TRADER / PARTNERSHIP
LCV Tax Allowances and Rules 2007

Allowances - The Facts

• The BIK changes to 'Van tax' introduced 6th April 2007 do not affect Sole Traders or Partnerships.
• Tax Allowances fall into 3 categories:
  1. Capital Allowances.
  2. VAT Allowances.
  3. Funding Allowances.

Capital Allowances

• Small sized businesses qualify for 1st year write down allowance of 40% (VAT exclusive) and medium sized qualify for an allowance of 50%.
• Thereafter 25% per year of the balance remaining.
• If the vehicle is sold at the end for more than the written down value the balance is taxable, if sold for a loss then there is an additional allowance.

VAT Allowances

• LCV's qualify for a VAT reclaim subject to the business being VAT registered & the vehicle being purchased outright or on a finance purchase plan.
• VAT on hire plan rentals (Contract Hire or Leasing) is also fully reclaimable.

VAT
VAT may be reclaimed by registered businesses that purchase a qualifying commercial vehicle to the extent that the vehicle is used for taxable purposes i.e. if a vehicle is used 50% for business purposes and 50% for private purposes then only 50% of the VAT paid can be recovered. The same rule applies to fuel purchases by a business (this is not generally known and Her Majesty's Revenue & Customs catch a large number of employers avoiding tax!).

DISCLAIMER

The tax allowances detailed are subject to timing differences and the status of your business. You should check with your Accountant or Tax Adviser that you are eligible to take advantage of these allowances. Personal use of these vehicles may give rise to a tax assessment and we recommend you discuss this with your Accountant or Tax Adviser. Details correct at time of publication. Tax information is provided as a guide only. Tax liability can vary according to circumstances. Please contact your local Inland Revenue office for further information.

You can contact The Inland Revenue Contact Centre on 0845 300 3939 or visit their web site at www.inlandrevenue.gov.uk.