The construction industry and the switch to electric vans

There’s a revolution taking place in the van market and the construction industry is taking full advantage.

Electric vans are becoming increasingly popular with directors and employees, who are able to avail themselves of a zero benefit in kind charge from 6 April 2021 in respect of any private use.  That’s correct – a zero tax charge on private use of an electric van! 

In comparison, petrol or diesel vans provided to employees or directors and available for private use can give rise to benefits in kind totalling £3,500 and fuel charges of £669, leaving the taxpayer with potential tax charges of £1,667.

But what about the typical self-employed sub-contractor in the construction industry provided with a similar vehicle?

 A van is an item of plant and machinery and is totally distinguishable from a car for benefit in kind purposes when provided to employees and directors.  Similarly, where provided to sub-contractors who are not assessed for benefit in kind charges, an unsought or incidental benefit may accrue.  This does not in any way deny the business eligibility of the expenses of running the van or capital allowances on the purchase of the vehicle.  It also does not confer income on the sub-contractor, nor does it indicate a contract of service.

Where clients regularly allow sub-contractors to take vans home at night so that they can travel directly to site, it may be worth considering making clear, as part of the induction process and health and safety review, that personal use of the vehicles is prohibited other than for home-to-site travel.  Some prudent clients install trackers or insist on mileage logs being maintained and any breaches can result in withdrawal of the vehicle.

If the above advice is followed, the sub-contractor should not be burdened with any personal use charge nor the contractor denied the tax relief.

Added to the above tax advantage is the new 130% super-deduction introduced on 1 April 2021 until 31 March 2023. Construction companies investing in qualifying new plant and machinery will benefit from 130% first year capital allowances.  In this way, companies can cut their corporation tax bill by up to 25p for every £1 they invest.

In order to take advantage of the above reliefs, please consult your tax advisor to ensure that your company qualifies and that such investments meet your business requirements.

If you would like to raise anything we’ve discussed in this article, please call us on 020 8515 2975 or email us at info@guildhubservice.co.uk and talk to our expert team. We’re here to help.