Company van tax explained - What to expect from HMRC

A company van (Light Commercial Vehicle, LCV) is used to carry loads with a maximum weight capacity of 3,500kg, not including Heavy Goods Vehicles (HGV). Company vans are available to employees and are purchased or leased by the company - drivers do not own the vans.

Do I have to pay tax to drive a company van?

Employees are liable to pay tax on all private journeys which are considered as ‘significant private use’ - these being trips used by the employee for their own personal benefit, normally regular trips. If the company provides the employee with the benefit of personal use, and this is not correctly declared, then a tax charge will apply.

Examples of significant private use of a vehicle provided by HMRC:

• Regularly taking the van to a local supermarket

• Using the van for annual holidays

• Using the van outside of work for social activity

Employees do not have to pay tax on any journeys which are considered as ‘insignificant private use’ - considered a very rare trip which would not be conducted regularly by the employee. These journeys would typically be short and infrequent.

Examples of insignificant private use of a vehicle provided by HMRC:

• Taking large items to the tip a couple of times within a year

• Regularly making a small detour to purchase a newspaper at a local newsagent on the way to work

• Checking in at the dentist on the way home from work.

Situations do arise where HMRC conduct regular audits on companies across the UK, but how can you prove a trip to the shop was insignificant?

The difference between these journeys comes down to evidence and record-keeping - a driver's personal situation will not be taken into account.

HMRC compliance inspectors may check vehicles parked in locations such as supermarket car parks (including weekends). A DVLA search is then performed to see who and where the van is registered to. If the registered keeper of the van is a company, then checks are made as to whether or not any associated company van benefits have been declared on their employees’ P11Ds. If not, they will then conduct an Employer Compliance Audit.

As a result of these random audits, companies across the UK can face significant tax liabilities.

How can a company avoid significant private use of a vehicle?

HMRC expects businesses to be able to demonstrate control over how company vans are used.

This includes:

• Evidence that vehicles are not used for significant private journeys

• Clear policies and procedures communicated to employees 

• Steps taken to prevent misuse

The employer and the employee can avoid any benefit charges linked with company vans or fuel by keeping sufficient records to show that the van is mainly used for work journeys and ordinary commuting.

A lot of companies record their mileage manually using pen and paper, which is very time consuming. A lot of drivers with a very busy schedule tend to judge distances and times travelled. These inaccuracies can also lead to penalties especially where records cannot stand up to HMRC scrutiny.

What is required by HMRC for mileage records?

In 2026, the expectation is that these records are accurate, complete, and easily accessible in the event of an audit.

How to protect myself or my business from a tax penalty

ABAX provides automated, digital mileage logs that remove the need for manual record-keeping.

ABAX Triplog automatically documents all driving via GPS, calculates mileage and distance, helping businesses:

• Maintain accurate, HMRC-compliant records 

• Reduce administrative workload 

• Minimise the risk of penalties during audits 

By replacing manual processes with automated tracking, businesses gain clearer visibility over how vehicles are used across drivers, jobs, and locations.

In many cases, this visibility also extends beyond vehicles - helping businesses track trailers, tools, and equipment alongside vans, creating a more complete operational overview.

ABAX has helped many companies increase control of their fleet, reduce risk of HMRC audits as well as increase efficiencies.

Find out more on company van tax on the HMRC website