Benefits in kind (BIK) are goods and services provided to an employee (or a member of their family or household) for free or at significantly reduced cost. The type of benefit and the way it is provided can affect the tax and NICs to be paid and the reporting requirements.

Private use of a company vehicle creates a taxable BIK, with the amount of  benefit depending on the type of vehicle and fuel. The tax charge on an employee's private use of a van is generally lower than that of a car (zero in some circumstances) and as such an employer-provided van may be a viable alternative to a company car.

Is it a car or is it a van?

HMRC defines a company van as ‘a mechanically propelled road vehicle that is a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description) and has a design weight not exceeding 3,500kg’. That the vehicle might be considered a van for other purposes, such as road tax or VAT, is irrelevant. HMRC guidance at EIM23110 states that ‘actual use of a particular vehicle is irrelevant: the statutory test is a test of construction, not use’.

The tax case of Coca-Cola v HMRC [2020] covered the issue of whether crew cab vehicles (which have a second row of seats behind the driver and can carry a larger number of passengers than a transit van) were cars or vans for BIK purposes. Coca-Cola argued that the crew cab vehicles used by their staff were vans, while HMRC said they were cars. The Tribunal decided in HMRC's favour since the vehicles considered made substantial provision for passengers. Therefore, their predominant purpose could no longer be that of carrying goods.

'Restricted private use'

Provided the van is primarily needed for the employee's job and not used for private purposes, they can drive the van for ordinary commuting between the home and workplace. This is because it falls under the 'restricted private use' exemption.

If the employee uses the van privately outside of commuting, they will incur a fixed BIK charge. This is usually significantly lower than on an average car BIK, generally making employee provision of vans a win-win solution. Providing an employee with a company van is therefore a far better option than providing a car, where any commuting would cause a claim that the car is only used for business travel to fail.

What is the charge?

The charge is based on a standard scale charge of £3,960 per annum for 2024/25 should the van emit CO2 when driven (which is the majority of vans). This amount is taxed at the employee’s marginal tax rate such that for a basic rate 20% taxpayer, the tax is £792; £1,584 for a higher rate 40% taxpayer; and £1,782 for an additional rate 45% taxpayer. In addition, the employer providing the benefit pays employer’s Class 1A NIC on the value of the benefit at 13.8% (i.e. £546.48). A flat rate benefit of £757 applies should the employer provide fuel.

Note that there is no BIK charge for zero-emission company vans. Therefore, a company's electric van can be used by an employee as a tax-free benefit and it will be available for unrestricted private use.