Comments of the CIOT on the Inland Revenue consultation of 8 May 2003, sent to the Revenue on 31 July 2003. The Chartered Institute of Taxation is pleased to respond to this consultation paper, although we must begin by noting that this is far from being an area in which the prime activity is the avoidance of tax. There is very little benefit to the private person from having the company van, emblazoned with the company logo, parked outside the front door of the home. We believe that the benefit in kind charge was originally set at a low level for this very reason.
We also find it hard to respond directly to many of the questions posed (particularly the Additional Questions). To some of the questions we do not know the answers. Some we find contradict each other. For example, the retention of a scale charge would keep things simple (question 1) and would be something we support, but moving on to a charge based on Euro emissions data (question 9), whilst environmentally friendly, would no longer be simple, and possibly could no longer be described as a “scale charge”. This is particularly so if “different levels of charge are to be set according to the level of private benefit to the individual” (going back to question 1 and page 9 of the consultation paper). A halving (or elimination) of the standard charge for low emissions vehicles would, of course, keep it simple.
Instead, therefore, we respond by making some points that we feel are relevant to any proposed changes to the taxation of employees who use company vans.
1) The benefit in kind on the van which is a real company van, a "tool of the trade" to use a phrase suggested by our colleagues at the ICAEW, should remain low and on a flat rate scale charge. It is simple to operate and entirely appropriate for the taxation of what is not a major benefit in kind. As above, we would suggest that there are relatively few people who would view the company van parked outside their home as a “benefit” - apart, of course, from the small saving in their private home to work travelling costs. We are sure that it was on this basis that the charge was set at a low figure and was deemed to include fuel as well as any minor “capital” benefit from having such a vehicle available for private transport. We think that any change, or complication, to something that clearly works well in practice would not be welcome.
2) We are firmly of the view that the rules for shared vans are too complex and should be abandoned. We have said this in our response to Exposure Draft 6 (October 1999) of the Tax Law Rewrite Project and many times since. The Carter Payroll Services review (November 2001, paragraph 5.3) said that the rules were complex and that they should be reviewed "to see if there is scope for simplifying them". If it is really felt to be necessary to have any shared van rules, the van benefit could be apportioned in exactly the same way as a shared car, ie on a just and reasonable basis (per s148 ITEPA). It does seem odd to have these complicated rules for shared vans covering 6 pages of ITEPA, when apportionment of the car benefit (which is invariably more substantial) covers only half a page.
3) We have no fundamental objection to basing the van charge on emissions data, but we do not think it would be a good idea to enact any changes to the van rules until such emissions data are available. Two changes to the rules in a short space of time would not be welcome. If you are to avoid the complications of too many different charges on what is a relatively minor benefit, we suggest that the charge should still be what we would regard as a “scale charge”, ie a fixed amount for any van within a certain emissions range.
4) Losing the lower charge for older vans does not recognise that what is being taxed here is the benefit to the employee of the private use of a van. If the van is older, the benefit is lower. If the Government wish to encourage employers to provide newer, more environmentally friendly vans, they should give them enhanced capital allowances on purchase and the means to dispose of the older vans in an environmentally friendly manner, ie changing the benefits charge on the employee is unlikely to be sufficient to change the purchasing pattern of the employer. Vans are not like company cars. Employees exercise little choice over their purchase. What is being taxed is the "benefit to the employee" not the "detriment to the environment”.
5) We recognise that the Government may wish to address the issue of cars being “dressed up” as vans, but think that this would be better done by redefining the van for the purpose of ITEPA, ie amending s115 to exclude vans which are really cars. It would be good if any changes were aligned so that the same rules applied for VAT purposes.
6) For the genuine commercial van we see only additional burdens being imposed by the proposal for a separate fuel charge. As above, we think that a single flat rate charge for the private use of a company van is a simple, administratively efficient and deregulatory way of taxing a minor benefit in kind provided to a relatively small group of employees.
7) By contrast, for those employees who only take the van home because of all or most of the following:
- it is needed to pick up other employees the next morning,
- they need to get to the job with the right tools the next morning,
- they need to avoid vandalism to the tools which would otherwise occur if the van was left overnight at unprotected business premises,
- they are on call overnight,
there should be clear "pool van" treatment, ie s168 ITEPA needs amending to cover what is a common occurrence with company vans. We can give a real example of this from one of our members as follows:
”We have a company client which provides a repairs and servicing facility for heavy goods vehicles and buses. The company provides a 24-hour breakdown service, which means that one employee or other will be on standby for emergency call-outs every night. The employee is provided with a breakdown van which is full of tools and is not suitable for private use. However, the employee will drive the van from the company's base to their own home at the end of the normal day shift then return to the depot in the van the following morning. This means that the employee loses no time in attending the call-out. It would not be commercially viable for the employee to travel in from home to the depot in order to collect the breakdown van, bearing in mind that the company is "marked" by reference to the time taken to attend a breakdown.
”The Inland Revenue have suggested that the employees should be charged a benefit in kind for the private use of the breakdown van represented by the depot to home and home to depot mileage. Whilst this may fit in with the letter of the law I personally think that it is just plain daft.”
In theory many van drivers may be attached to a base, but in reality their daily work involves visits to numerous sites, eg window fitters. It makes no economic sense for the van to be returned to base each evening and picked up each morning - that just results in loss of time that could be spent on site. There is no real “benefit” to employees in these circumstances so pool van treatment should be available.
The Chartered Institute of Taxation
31 July 2003
Technical Department
020 7235 9381
