Posted by Robert Bailey on October 2, 2017
Is it a van or not a van? It matters for tax purposes.
In 2015, I wrote an article on vans which explained HMRC’s practice for determining whether a vehicle is a car or a van, with particular reference to the issue of vehicles adapted to carry both a commercial load and passengers.
The “double-cab pick-up” loophole has been extensively used as a tax efficient (but not fuel efficient) benefit-in-kind, enabling a large, and nowadays quite luxurious, vehicle to be provided to directors at minimum tax and NIC cost, and also obtaining full VAT recovery.
The basis of the classification as a van is that, despite having two rows of seats and windows in the sides of the rear cabin, the pick-up is capable of carrying 1 tonne of cargo, and so is “a vehicle of a construction primarily suited for the conveyance of goods or burden of any description”. This 1 tonne rule can also apply to panel vans, suitably adapted, but HMRC have raised concerns for a number of reasons, including cases where the load bay and the passenger cabins are not separated.
Three recent tribunal appeals were heard together concerning two versions of VW Kombi and a Vauxhall Vivaro. All three were originally traditional vans, as opposed to pick-ups, with a second row of seats, but still capable of carrying 1 tonne of cargo. The result of the appeal was split, with both VW Kombis classed as cars but the Vauxhall as a van.
The reasoning behind the decision was a requirement by the First Tier Tax Tribunal that the word “construction” should be considered broadly, to include all modifications and consider the whole of the vehicle’s parts, even if removable, and to consider the primary purpose of the vehicle. The Vauxhall was found to still be primarily suited to the carriage of goods, but the two VWs were considered to be genuinely multi-purpose vehicles with no overriding primary suitability for either.
A First Tier Tribunal decision is not binding, but one should now expect an increase in HMRC’s challenges to the status of “vans” with more than a single row of seats. The clear inference is that the 1 tonne load capacity rule is not the end of the story, and one must also stand back and consider the primary purpose of the vehicle once modified.
One must also be concerned as to how this may affect the double-cab picks. While the load carrying capacity of such vehicles cannot be denied, in practice, many of the load bays are never used and the passenger cabins are large and very well appointed. Are these primarily suited to the conveyance of goods, or are they actually multi-purpose vehicles, equally suited to use for both passengers and cargo?
Caution is needed – given the high cost and poor fuel economy of double cab pick-ups, the difference in the tax cost should HMRC succeed in a challenge would be painful.
As ever, if you want any further advice, please contact us.
Here you can download Bishop Flemings document outlining Business Motoring Tax Aspects.
Download (315 KB)