Vehicle Benefit in Kind (BiK) Calculations
If you use vehicles for your business and your employees utilise them for their own private use, including journeying to and from their place of work, then this will be considered a taxable benefit by the Inland Revenue. Just how much tax will be due depends on three main factors:
- The value of each vehicle and first registration fee, i.e. the manufacturer's on-the-road cost at the time of purchase minus vehicle excise duty and first registration fee.
- The vehicle's CO2 emissions.
- What type of engine it has - petrol or diesel.
The resulting figure is the BiK calculation and tax due will be assessed according to the income tax rate of the driver. If you are also providing free fuel for private use to your employee, this will be included as a taxable benefit and increase the amount to be paid.
Although using a company vehicle for private journeys may initially be thought of as a bonus, the impact on the employee's tax bill and the extra duty that HMRC will require from the employer needs to be given serious consideration.
How BiK Impacts Both Employers & Employees
BiK has a significant impact on both the employer and employee. The employee is required to pay their marginal tax rate of 20% or 40% on the resulting BiK calculation. Employers will have to pay extra dues incorporated in their current National Insurance contributions. Multiply the amount per annum across all the relevant drivers in your entire workforce and the final cost to the company could be huge.
Miles clocked up, and fuel used on journeys that don't benefit the company, increase wear and tear on the vehicle and cause the driver and employer to pay extra revenue, so have little to commend them. Employers who choose to offer this 'benefit' and make the BiK payment will not only need to be able to accurately track the whereabouts of a vehicle at any given time but also who paid for the fuel.
The Added Complications of Calculating BiK
To complicate matters further, the main elements governing the BiK calculations, like the percentage of CO2 emissions, are also subject to an annual change for the foreseeable future.
Then there are other question marks hanging over such things as new procedures relating to taxable benefits for company vans, restricted private use and other circumstances that make administrating BiK quite difficult. Even what qualifies as private use has some grey areas.
However, the two biggest challenges are to find the best way to calculate usage in the first place and provide proof of use, especially if you feel the BiK tax does not apply to you. The only sure way to achieve this to an adequate level is to be able to produce accurate mileage and vehicle usage reports.
Software as a Service (SAAS) is a new generation of fleet tracking software delivered through a web browser. It provides you with the ability to show exactly where a vehicle was (precise dates and times) as well as a complete range of information useful to the management of your business.
Keeping Vehicle BiK Simple through GPS Fleet Tracking
Nothing provides unequivocal proof of vehicle use and business mileage like GPS Fleet Tracking. While your GPS tracking system is assisting you to identify and resolve numerous other issues, i.e. poor driving habits, excessive idling, inefficient routing and dispatching, unauthorised vehicle use and poor vehicle maintenance, it's also providing the information needed to prove to the Inland Revenue that this tax does not apply to you and your employees.
No extra work is required by the employees to achieve this and, if your drivers have ever had objections to having a GPS Fleet Tracking system installed in their vehicle, this is a very good reason to reconsider.
A Valuable Business Tool
You wouldn't necessarily consider purchasing a GPS Fleet Tracking system for the sole purpose of providing proof of vehicle use to the Inland Revenue.
However, you shouldn't dismiss it without considering all the other benefits to your business. Indeed, if you have the right information to work with, it's possible to cut down on fuel consumption and cost, reduce speeding fines, enhance the experience of the customer and improve health and safety. It's therefore easy to see how a GPS Fleet Tracking system can be a valuable intelligence tool for your business. To get more information about administering vehicle BiK, see this documentation by fleet management supplier Fleetmatics.
To find out more about BiK and how GPS vehicle tracking tracking can impact your business, or to get free quotes from top UK vehicle tracking suppliers, simply fill in our simple form. We will match your fleet requirements to those suppliers best suited to your business profile to make sure you get the best deals. Filling in the form will only take a few minutes, so you can start saving your company time and money today.