Workers who take home company vans overnight for personal use are facing a massive increase in their tax liability unless their companies act quickly, accountants and business advisers PKF has warned.

From 6 April 2007, the tax costs attributable to company vans will increase by 600 per cent from £500 to £3,000 – equivalent to the charge made on a £20,000 company car. If private fuel is provided, workers could face a tax hike of 700 per cent.

PKF predicts HM Revenue & Customs (HMRC) will simply apply the increased levy to all van drivers who are registered for the existing lower charge unless their companies write in before January, when new personal tax codes are issued. Drivers would simply be charged the higher level in their April pay packets.

The increase is set to have a major impact on the take home pay of employees who are given personal use of a company van. A worker who earns £15,000 and has access to a company van and fuel would face a tax increase of around £660 per annum from 6 April 2007.

PKF points out that to avoid the increases businesses will need to change the terms and conditions on which they provide vans to reflect that they are not for personal use. Drivers will need to keep log books of mileage as the tax will not arise if personal use is ’insignificant’.

Brian Lovie, director of employment taxes at PKF said, "It is important for all companies that are going to be affected by the new rules to act now in order that the impact on employees and the company is carefully managed, and that, where possible, unnecessary tax costs are avoided."

"Given HMRC’s existing workload and backlog, they haven’t got the capacity to contact every company about the changes. The most likely outcome is that they’ll simply apply new tax levels and wait for the reaction. That is going to cost individual workers hundreds of pounds, and their companies thousands in national insurance."

"HMRC’s target isn’t really the ’white van man’. In reality, they’re after managers who are driving the new breed of double cab pick-ups which, for tax purposes, are classed as vans. But in closing that ’loop hole’, the tax man is penalising drivers of ordinary vans for whom this is a major increase."