Is your company vehicle a car or a van for tax purposes?
This is an important question for those who have company vehicles, as vans enjoy favourable benefit in kind treatment compared to cars. However, what you think of as a van could, in fact, be classed as a car for tax purposes!
From HMRC’s viewpoint, every mechanically propelled road vehicle is a “car” unless it is:
- A goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description) i.e. a van or heavy goods vehicle, if it’s big enough
- A motorcycle
- An invalid carriage
- A vehicle unsuitable for, and not commonly used as, a private vehicle
For those driving a Ford Transit or similar, the above criteria may be enough to reassure you that your vehicle is a van. However, when it comes to some double cab pick-ups, combi vans etc which allow for seats to be added, confusion creeps in if they start to look like they might be equally suited to conveying people and/or goods. Noting the word “primarily” above, are they, in fact, cars for tax purposes?
When it comes to double cab pick-ups, HMRC guidance states the following:
A double cab pick-up normally has:
- A front passenger cab that contains a second row of seats and is capable of seating about four passengers, plus the driver;
- Four doors capable of being opened independently, whether the rear doors are hinged at the front or the rear (two-door versions are normally accepted to be vans); and
- An uncovered pick-up area behind the passenger cab.
With these types of vehicles (and these only) the definition has been aligned to that already in use for VAT, which states that the vehicle will be accepted as a van for benefits purposes if it has a payload of one tonne or more.
A combi van tends to look like a traditional van but may have an extra row of seats fitted behind the driver. In light of the “Coca-Cola case” heard in the Appeal Court in 2020 and the absence of any updated guidance, they are, however, likely to attract more HMRC attention.
In essence, it’s the purpose for which the vehicle was constructed that matters (not the actual use), and that “construction” needs to take into account subsequent modifications made. The intention is not that small differences should tip the balance in deciding what a vehicle is primarily suited for; but adding extra seats, whether or not they’re removable, or additional windows etc, are factors that suggested to the Appeal Court (and likely will to HMRC) that a vehicle is equally suited to the carriage of people or goods. If so, it’s a car and not a van.
Even with the new clarity around combi vans this can still be a complicated area, and impacts more than just the tax on the benefits as there are VAT and capital allowances to consider too. If you need any assistance, please get in touch with your usual Larking Gowen contact.
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