Vehicle Classification

Vehicle classification used for work purposes can be complex. Both the vehicle and type of usage affect how the tax authorities want the vehicle to be accounted for.

Van driving on main road

What Is Classed As A Commercial Vehicle?

Commercial vehicles are classed as vehicles weighing in excess of 3.5 tonnes or capable of moving a payload of more than 1 tonne. These being:

  • Lorry
  • Tractor
  • Van
  • Pick up Truck
  • Car Derived Van

Commercial vehicles are most commonly accounted for as ‘commercial vehicles used only for business purposes’. When used for business only purposes, neither the employer nor employee is subjected to any personal benefit taxation and no mileage records are required. Where personal use is granted to the employee, benefit taxation will arise. Personal use is classified as usage outside the confines of the business, including commuting to a permanent place of work, such as the office.

If the employee’s fuel is fully expensed by the business, a further fuel benefit tax is applied. Where the cost of business fuel is reimbursed to the employee, a mileage log is required.

What Is Classed As A Company Car?

A company car is given to an employee as part of their job role and often doubles up as a benefit when used privately. If the employee uses the car privately, including commuting, a Benefit in Kind (BIK) charge is applied as ‘cash equivalent value’ onto the employee’s taxable earnings.

The Benefit In Kind charge is calculated as follows:

List Price of Car x Multiplier % (based on CO2 Emissions)

If the employee reclaims the cost of the business mileage, a mileage log is required. If the business pays for all of the fuel, an additional fuel benefit charge is generated. A Road Fuel Scale Charge is also applied to counteract the proportion of VAT that the business is reclaiming on fuel used privately. The charge in 2018/19 is;

£22,100 x Multiplier % (based on CO2 Emissions)

What Is Classed As A Private Car?

A private car used for business purposes, sometimes referred to a ‘Grey Fleet’ is an inexpensive solution for companies where business mileage is typically low. By using their personal car for work purposes, neither employer nor employee need to worry about benefit charges levied on the car or fuel. The employee can reclaim the fuel at a cost of £0.45 per business mile. A mileage log is required.