§ "156A(i) This section shall apply where a van is provided by an employer to an employee for private use.
§ (ii) In these circumstances, no benefit shall arise under section 156 above.
§ (iii) Instead, the scale benefit that will apply to a van will be £200 for each year.
§ (iv) The above scale benefit will be reduced proportionately when the van is available for private use for less than the whole tax year.
§ (v) The van will not be regarded as available for private use when it is a pool van (to be determined in like manner to a pool car as is set out in Taxes Act 1988, section 159).
§ (vi) For the purposes of this section, a van means any mechanically propelled motor vehicle construct-ed primarily for the conveyance of goods or burden of any description.".'.—[Mr. Beith.]
§ Brought up, and read the First time.
§ Mr. Beith
I beg to move, That the clause be read a Second time.
Hundreds of thousands of employees who are provided by their employer with a van ih which they drive home at night now face additional income tax charges. That is also a problem for their employers because they have much paperwork associated with it. It results from the Inland Revenue treating the provision of a van for private use as a benefit in kind, so thousands of employers, from the largest such as British Telecom to small businesses such as plumbers, shopfitters and joiners, face the prospect of a bureaucratic nightmare in maintaining the records necessary to fill in form P11D, which is the form on which benefits in kind are included.
The tax charge applies whenever an employer makes a van available for the private use of an employee, and that will include private motoring on evenings or weekends, travel from home to either the main base of work or to the first call of the day, and travel to home from the main base of work or from the last call of the day.
Let us consider a plumber's employee who is provided with a van which he uses to make his calls and to carry his heavy equipment. He takes the van home each evening, partly because he has secure parking here, partly, perhaps, because it is a way of carrying his tools home and not leaving them around, and partly because he can then proceed to his first call the next day. The Revenue will regard as private use that private journey home, plus any use that he may make of the van at the weekend, and a tax charge will be raised on that.
It is well known that the provision of a car to an employee triggers an income tax liability computed with reference to a scale of charges in the tax legislation, but, because of the precise definition of a car in the legislation, the provision of vans for private use is not caught by the car scale charge provisions. The legislation enabling a tax charge to be levied on vans has been around since 1976, but until recently it has not been invoked by the Revenue.
The Inland Revenue finds out about benefits in kind from form P11D, which has to be completed by the employer in respect of every employee earning more than £8,500 a year, which is increasingly most people who would have the use of a van. The pre-printed form issued by the Revenue lists all the main tax benefits, and the employer fills in the details. Although technically the provision of a van for private use should in any event be filled in by the employer in the other section on the form, there was no specific box on the form to record the provision of vans. Largely because of that, most employers 298 did not bother. Apparently, that was allowed by the Revenue by default. The result is that people have not faced a tax charge on the availability of a van.
The Revenue appears to have changed its policy during the tax year 1990–91, and it started to raise the matter during inspections. During a form P11D inspection, a member of the Inland Revenue visits an employer and looks into the background documentation on the basis of which the form has been filled in. In some recent investigations, it appears that the Revenue took the view that it would regard the provision of a van for private use as a benefit from 6 April 1990, although not apparently from any earlier date. That approach of apparently ignoring previous tax years is completely non-statutory. It illustrates that there has been a change in the Revenue's policy.
For the employees the change means that they have to pay more tax. For the employers it means an awful lot of paperwork. Records need to be kept of individual vehicle costs right down to the last gallon of petrol, which employee has the use of the van in each year and each mile travelled by the van, differentiated between business and private use. Guidelines have to be established on what is business and what is private use. It is a complex task for employers. In many cases, small businesses have just one or two vehicles. Several employees may switch around and have the van for private use at different times in the tax year.
The only way to avoid the charge is to require the employee to return the vehicle each night to the employer's depot and hand in the keys and demonstrate that he did no private mileage during the day, for example, at lunch-time. That is an extremely elaborate procedure for the relatively limited benefit of the private use of a van.
Therefore, in the new clause we suggest a simple annual scale charge of £200. That would avoid the employer having to keep the records. It would fix at a limited point the liability of the employee to tax—that is the tax raised on the £200. The charge would be analogous to the car tax, but would be at a lower level. It seems reasonable to put it at a significantly lower level. First, the private use of a van has not been taxed in practice until recently. Secondly, the use of a van for private motoring is not exactly a luxury motoring perk.
I can speak with some authority and experience on the matter because, before we were married, my wife came to meet me on many occasions driven in a van which her father used to drive home from work. Sitting on a cushion in the back of a van for transport is not by any means an opportunity for luxury motoring. I must stress that I no longer have a financial interest in the matter because the events took place more than 25 years ago.
Not many employees who have the use of a van for private motoring would regard the imposition of a detailed charge justified mile by mile as a reasonable way of computing a tax liability. It does not make sense to the man who has the use of the van when he compares his pay slip with that of his mate who he drops off on the way home from work, who does not have the use of the van but gets a lift home in it. One of them pays a higher tax charge than the other because he has the van available. The procedures are wholly bureaucratic and could be easily remedied by the use of a small scale charge such as I have proposed.
§ Mr. Dorrell
The new clause proposes to set a scale benefit of £200 for the purposes of charging tax under schedule E on the benefit of a van provided by an employer to an employee for private use—one might add, of whatever kind. The right hon. Member for Berwick-upon-Tweed (Mr. Beith) justified his proposal on the ground of the undoubted complexity of the present position because there are no special rules governing the provision of a van to an employee. Such provision is consequently covered by the general rules which, as they apply to a van, can be complex.
I have some sympathy with the principle of the new clause. But the crucial question is whether the proposals should be added to the Finance Bill this year and whether the hon. Gentleman wants to go down as the Member of Parliament who introduced the tax charge on vans used privately by employees.
Of course, the use of scale charges is not new. It applies to the majority of company cars. It has been applied more recently to mobile telephones. The £200 charge that the hon. Gentleman proposes is, of course, the same as that which applies to a mobile telephone. I am not sure that it is reasonable to say that the value to the employee of the availability of a van is the same as that of a mobile telephone. The most obvious difference is that the capital and running costs of a typical van—they must be taken into account in setting a scale benefit because it is an approximation of the value of the benefit—are considerably higher than those of a mobile phone. A charge of £200 would seem rather low when set alongside the scale benefit of just over £1,000 for the smallest company car with a high business mileage, even bearing in mind the intrinsic difference between the two levels of benefit to which the right hon. Gentleman drew attention.
I do not want to rule out the idea of some scale benefit for company vans. The Inland Revenue reminded employers last year that the provision of vans for employees' private use should be returned on P11Ds. That leads, undoubtedly, to the complexity that the right hon. Gentleman has described. I invite him to consider withdrawing the clause on the basis that we recognise that the present position causes unnecessary complexity and that it is something that we undertake to consider.
§ Mr. Beith
I am glad to know that the Minister understands that from the employers' point of view complexity leads to problems, and that many employees might have to pay a larger amount of tax because their employers have not calculated carefully and accurately the relevant charges, because of the time involved. A scale charge, although perhaps a rough-and-ready method, is probably—the same applies to a car—a much simpler approach from an employee's point of view.
I recognise the willingness of the Minister to consider the issue with greater care between now and the next Finance Bill. On that basis I beg to ask leave to withdraw the motion.
§ Mr. Deputy Speaker
The Question is, That the clause be read a Second time. As many as are of that opinion say Aye. To the contrary, No.
§ Question negatived.