Tax Information

Image: L200 Image: Outlander

The tax benefits of driving an LCV

If you enjoy the benefit of driving a company car, or if you own a business, choosing your vehicle wisely could save you a considerable amount of money courtesy of Her Majesty’s Government. This is because certain vehicles are not classed as cars at all, but as light commercial vehicles, and driving one could save you literally thousands and thousands of pounds in tax every single year!

Take Mitsubishi’s L200 four-wheel drive Double Cab, for example. Thanks to its combination of reliability, drivability, impressive styling and work hard/play hard ethic this vehicle has become something of a cult. Yet despite its exceptional good looks, its load capacity, even with a canopy fitted, means that for BIK tax and VAT purposes every single model is classed as a light commercial vehicle (LCV).

If you don’t want a pick-up, but could use a van, the famous and highly-rated Shogun is also available in commercial vehicle guise, plus the ever popular Outlander, and finally the new addition to the line the ASX.

Commercial vehicle tax facts for employees

All L200 models, together with the Shogun SWB 4Work, the Outlander 4Work, and the ASX 4Work are classed as light commercial vehicles (LCVs), and all LCVs enjoy a standard Benefit in Kind liability no matter what their purchase price or how many accessories you fit. This means that, for a tax payer in the 40% tax bracket, driving a Mitsubishi LCV could save you in the region of £4,000 every year on Benefit in Kind tax payments compared with a similarly priced passenger car. That's an extra £300 or more in your pocket every single month!

  • If you enjoy unrestricted private use of a Mitsubishi LCV, in the tax year from April 2011 your BIK liability is £3,000 x your marginal tax rate, ie, a 20% tax payer will pay £600 per year whilst a 40% tax payer will pay £1,200 per year.
  • If your employer provides your fuel for private use an additional BIK liability of £550 applies, which means the tax payable for a 20% tax payer is £110 per year and £220 per year for a 40% tax payer.
  • Employees who use a commercial vehicle which is only available for business purposes, and this includes home to work travel, have no BIK tax liability whatsoever.

This table compares the tax payable on a Mitsubishi L200 Barbarian Double Cab and equivalent vehicles with a similar retail price. With its sophisticated 4-wheel drive system, upgraded engine and top-of-the-range specifications, such as leather seats and satellite navigation, it is a highly desirable vehicle, yet it shows a BIK and fuel benefit tax saving of up to £3,353!

Mitsubishi L200 Barbarian D/C Manual Honda CRV 2.2i-DTEC ES Manual Skoda Superb Estate Elegance TDI CR Manual Land Rover Freelander 2.2 TD4 GS Manual
OTR price (inc. VAT) £25,978.80 £25,390.00 £25,585.00 £25,535.00
Vehicle BIK liability £3,000 £6,855 £5,885 £6,639
Fuel benefit in kind † (inc. private use)* £550 £5,076 £4,324 £4,888
CO2 Emissions LGV 171g/km 151g/km 165g/km
Tax liability as a percentage n/a 27% 23% 26%
20% tax band
Vehicle tax @ 20% £600 £1,371 £1,177 £1,328
Fuel benefit tax @ 20% £110 £1,015 £865 £978
Total tax payable for 20% tax payer £710 £2,386 £2,042 £2,305
40% tax band
Vehicle tax @ 40% £1,200 £2,742 £2,354 £2,656
Fuel benefit tax @ 40% £220 £2,030 £1,730 £1,955
Total tax payable for 40% tax payer £1,420 £4,773 £4,083 £4,611

* Business milage may be reclaimable at up to HMRC approved rates.
† Based on 27% charge for Honda (24% plus 3% diesel surcharge), 23% charge for the Skoda (20% plus 3% diesel surcharge) and 26% (23% plus 3% diesel surcharge) £18,800 taxable amount for employer provided fuel. Fixed figures to increase by RPI each year.

Commercial vehicle tax facts for employers

Image: L200 Image: Shogun All L200 models, even if you fit a canopy, as well as the Shogun SWB 4Work, the Outlander 4Work, and the ASX 4Work are classed as light commercial vehicles (LCVs).

  • Providing your employees with an LCV instead of a passenger car is like giving them a substantial instant pay rise, as driving a Mitsubishi LCV could save them many thousands of pounds every year in BIK tax payments: for details of some comparisons see the table above.
  • As with BIK, Class 1A National Insurance Contributions are considerably reduced on an LCV compared with a passenger car. If your employee enjoys unrestricted private use of a Mitsubishi LCV, in the tax year from April 2011 Class 1A NIC is £414 (£3,000 x 13.8%) whereas Class 1A NIC on the Honda CRV would be £946 (£6,855 x 13.8%).
  • LCVs qualify for a VAT reclaim subject, obviously, to the business being VAT registered, the vehicle being used for business purposes and it being purchased outright or on a finance purchase plan. The percentage of VAT reclaimable is dependent upon the extent to which the vehicle is to be used for business purposes, ie, if the vehicle is used 50% for business purposes and 50% for private purposes then only 50% of the VAT can be recovered. The same ruling applies to fuel purchases.
  • The VAT on an LCV hire purchase plan rental (contract hire or leasing) is also fully reclaimable, subject to the points made above.
  • Car tax (Vehicle Excise Duty) on all Mitsubishi LCVs is at a standard rate of £210 per annum, irrespective of their CO2 emissions.

NB Tax liability can vary according to circumstances and we suggest that you check with your accountant or tax advisor to see what allowances you are eligible to take advantage of.

Disclaimer

The tax allowances detailed are subject to timing differences and the status of your business. You should check with your Accountant or Tax Adviser that you are eligible to take advantage of these allowances. Personal use of these vehicles may give rise to a tax assessment and we recommend you discuss this with your Accountant or Tax Adviser. Details correct at time of publication. Tax information is provided as a guide only. Tax liability can vary according to circumstances. Please contact your local HMRC office for further information.

You can find more details on the HM Revenue & Customs website - www.hmrc.gov.uk