dua@dua.co.uk 020 8421 3555

What are Benefit-in-Kind and who pays tax on it

5 Jun

What are Benefit-in-Kind and who pays tax on it

Benefit-in-kind (BIK) are benefits which employees or directors receive from their employer but which are not included in their salary. They include company car/van, private medical insurance, gym membership, the list goes on!

Where benefits are taxable, tax is paid on the taxable value of the benefit. HM Revenue and Customs defines this as the cash equivalent value. This is usually the amount it costs the employer to provide the benefit. The tax is paid by both employer and employee.

Latest Update on Company Vans

What is Classed as a Van and its Tax Implications

Looking at any van, it should be clear to see that it is, in fact, a van. However, a recent tribunal judgement has changed this presumption, causing confusion for all. The recent three tribunal appeals concerning Volkswagen Transporter Kombi and Vauxhall Vivaro have set standards in stone unless overruled by higher tribunal. Both vehicles were originally traditional vans, with a second row of seats, but still capable of carrying 1 tonne of cargo. The result of the appeal was split, with VW Kombis classed as car but the Vauxhall as a van – this resulted in a large tax bill for both the business and its employees.

According to the tax legislation definition of a Van means a mechanically propelled road vehicle, which

  • Is a goods vehicle – the construction primarily suited for the conveyance of goods
  • Has a design weight not exceeding 3,500 kilograms

Looking at the entirety of the both vehicles, and taking all of its characteristics into account including the primary purpose of its construction, the Vauxhall Vivaro was found to still be primarily suited to the carriage of goods, however, the VW Kombi was considered to be a genuine multi-purpose vehicle, with no overriding primary suitability for either.

The judge stated that ‘The VW Transporter Kombi cannot therefore be regarded as a goods vehicle’ [Coca-Cola v/s HMRC (TC06082) 2017]

Accordingly, the judge decided that the VW Kombi should be regarded as a car for income tax and NIC benefits purposes.

Tax Implication of Van v/s Car

VAN  

  • 100% AIA capital allowances on the acquisition of the van
  • 100% VAT recovery on the purchase of the van, in most cases
  • Low on BIK
  • Low fuel benefit

CAR

  • 100% AIA not available, but you can get writing down allowances. Also for 2018/19 100% First Year Allowance is available if Co2 emission is below 50g.
  • You will struggle to get any VAT back on the acquisition of the car
  • High on BIK
  • High fuel benefit

Caution is required for existing and new businesses who own or are looking to buy VW Transport Kombis or similar due to high tax costs. Our team of business advisors and chartered accountants in Watford and London will work with you to ensure you get the right tax advice. Get in touch with our experts today.

Related Blogs

Dua & Co’s Guide to Your Property Investment Options

When it comes to investing in property, many people aren’t

read more

Updates on Making Tax Digital

This year, HMRC began the introduction

read more

How Dua & Co. Improve Your Business Processes

Making sure that your business processes

read more

Improving the Performance of Your Care Home Business

We’ve discussed before here at Dua & Co the many ways

read more

Follow us on: 

CONTACT US

Dua & Co (Watford)

1st Floor, 5 Century Court, Tolpits Lane, Watford, WD18 9PX

+44 (0)20 8421 3555

Dua & Co (City)

9 Devonshire Square London, EC2M 4YF

+44 (0)20 3356 9706

get in touch

yesBy checking this box, you agree to receive Dua & Co updates and offers via email. All subscribers must be over the age of 16. Recurring automated marketing messages will be sent to the email address provided. You can unsubscribe at any time.View Terms of Use and Privacy Policy.

All material on this site is used by permission. We may use cookies on this site. See our cookie policy here Registered to carry on audit work in the UK and Ireland; regulated for a range of investment business activities; and licensed to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales.

Read the Dua & Co Blog here

Provision of services regulations disclosure here

© Dua & Co 2018

Dua & Co. Limited trading as Dua & Co Chartered Accountants.

Dua & Co Limited is registered in England & Wales.

DIVERSITY AND INCLUSIVENESS

As a business, we have been clear in our commitment to Diversity and Inclusiveness. An important part of this is understanding the 'mix' of our people and measuring progress towards the goals that we have set ourselves. We can share our approach to employee monitoring, together with some statistics showing the make-up of our business. To obtain these please email us at dua@dua.co.uk