Schedule 14 - Vans
Finance Bill
10:00 am
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
If that is a stop-off en route, it will be acceptable. Introducing the provision for insignificant use simplifies the procedures for employers by enabling them to dismiss intermittent or incidental private use. Beyond that, the Revenue is examining the representations that have been made by some of the professional bodies and taking account of the concerns that have naturally been raised since the publication of
the Bill. We plan to publish guidance after the Bill has received Royal Assent that will further help employers.
The right hon. Member for Fylde asked about the definition of a van. He rather eloquently described what are known in the trade as double cab pick-ups. Although the Revenue and Customs have used a consistent and single definition of double cab pick-ups since 2002-03, changes in manufacture and vehicle design inevitably create some blurred boundaries. Broadly, vehicles that can legally carry payloads of 1 tonne or more will not be treated as cars. A car is primarily for the carriage of people; a van is primarily for the carriage of goods.
From 6 April next year, a nil charge will apply to employees who take their van home and are not allowed any further private use. That responds directly to the representations of employers that most employees are provided with a van for work and are expected to take it home overnight. In future there will be no tax or national insurance charge in such circumstances, which will involve about 85 per cent. of van drivers and save the basic rate taxpayer as a van driver about £110 per year.
If unrestricted private use is allowed, the existing scale charges depending on the age of the van will apply. However, from 6 April 2007, employees who choose to make full private use of their company van will be taxed on £3,000, which will mean tax of about £55 per month or £660 per year for a basic rate taxpayer. If an employer also provides free fuel for unrestricted private use, a new fuel charge of £500 will apply, meaning tax of about £9 per month for a basic rate taxpayer.
The hon. Member for Grantham and Stamford implied a concern for the environment and asked why the Government did not introduce a scheme based on emissions for vans, but the regime that we are proposing will help the environment. The reform abolishes a rather perverse incentive to drive older and more polluting vehicles because the tax charge on them is lower. The new fuel charge will reduce the blanket acceptance of fuel charge for private use and make it a matter of choice and consequence for employees. The introduction of a nil charge will limit private use to travel from home to work for more than 85 per cent. of users, generating a reduction in the amount of private mileage undertaken in commercial vehicles.
The reform will also reduce the overall administrative burden on employers. I mentioned the Small Business Service's recognition of that. We have consulted, listened, acted on the responses and recognised that company vans are used differently from company cars. The schedule modernises the tax rules for company vans and exempts more than 85 per cent. of current van users from tax charge altogether. It provides a major deregulation for employers, with scale charges in the future that properly reflect the benefit of private use. It has been praised and welcomed by the industry, by manufacturers, by representative bodies and by employers. On 25 March, Fleet News said in an article that the reform was
''a major boost for van fleets''.
On that basis, I commend the schedule to the Committee.
Question put and agreed to.
Schedule 14 agreed to.