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2016 Fuel and Van Benefit Rates Set

Newsletter issue - January 2016.

The Van Benefit and Car and Van Fuel Benefit Order 2015 (SI 2015/1979) comes into force on 31 December 2015 and takes effect for the tax year 2016-17 and subsequent tax years. The Order contains provisions for the following:

  • the cash equivalent of the van benefit will rise from £3,150 to £3,170 for 2016-17;
  • the van fuel benefit will increase from £594 to £598; and
  • the cash equivalent of the benefit of fuel for a car is calculated by applying the 'appropriate percentage' (normally calculated by reference to the CO2 emissions of the car) to the figure in ITEPA 2003, s 150(1). SI 2015/1979 provides that this figure will rise from its current level of £22,100 to £22,200 for 2016-17.

Provisions in Finance Act 2015, s. 10 phase out the nil van benefit charge for zero emission vans which was available for the tax years 2010-11 to 2014-15 inclusive. This is being phased out between 6 April 2015 and 5 April 2020 and means that employees using zero emission vans for more than insignificant private use will now be liable for the charge on a tapered basis until the full charge applies from 2020-21 onwards.

The cash equivalent of the benefit of a van for a tax year is calculated as follows:

  • if the employee uses the zero emission van for insignificant private use for the tax year, the cash equivalent is nil;
  • if that condition is not met for the tax year then,

(a) if the van cannot in any circumstances emit CO2by being driven and the tax year is any of the tax years 2015–16 to 2019–20, the cash equivalent is the 'appropriate percentage' of £3,150 (rising to £3,170 in 2016-17), and

(b) in any other case, the cash equivalent is £3,150 (2015-16 rate; rising to £3,170 in 2016-17).

The 'appropriate percentage' is:

20% for 2015–16;
40% for 2016–17;
60% for 2017–18;
80% for 2018-19; and
90% for 2019-20.

SI 2015/1979 can be viewed online at www.legislation.gov.uk/uksi/2015/1979/contents/made.