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Van or car - New Land Rover Discovery Commercial

Van or car - New Land Rover Discovery Commercial 2nd row of seats added

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A client is looking to purchase a new Land Rover Discovery Commercial (2 seats) and it will be sent straight from the production line to an approved modification centre to add a second row of seats that fold up to provide the bulkhead.

Usual questions:

VAT recoverable as a van?

AIA applies as a van?

Qualifies for van BIKs?

HMRC’s list indicates that Discovery Commercials are usually vans for VAT but it’s not up to date for this specific model.

https://www.accountingweb.co.uk/any-answers/hmrc-carvan-argument SK says the following regarding the conversion:

The fitting of removable rear seats doesn't alter the fact that the vehicle is of a construction primarily suited to the carrying of goods or burden.

This was held to be the case in the FTT case of Jones, where HMRC successfully argued that the installation of (difficult to remove) shelving in a Land Rover Discovery over the seats wasn't sufficient to alter the fact that the vehicle wasn't of a construction primarily suited to the carrying of goods or burden.

The added shelving meant it was able to, and was as a matter of fact, so used, but the purpose for which the construction of the vehicle was primarily suited was unchanged. 

 

Replies (8)

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By alan.rolfe
05th Dec 2019 15:10

It'll be a question of fact whether it is constructed primarily for the conveyance of goods or burden (i.e. van) or not (i.e. car). Whether this change is part of the construction or a later modification (as in the Jones case) is difficult to be sure.

CA's generally follows Income Tax BIK treatment, but VAT is based on payload capacity (>1 tonne).

The vehicle looks like a car and particularly if extra seats are added it may be something HMRC may argue is a car, but without the modification it does appear to be a van. Quite how the modification affects the position is hard to say, as it may hinge on how temporary or permanent the extra seats are.

It must be time for a review of the rules to make it easier to decide. I'm sure that the OTS will address this point to help with simplification in their usual efficient manner.

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Replying to alan.rolfe:
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By CWservices6064
05th Dec 2019 16:13

Some more details on this.

My client will buy the vehicles as 2 seaters and they will be taken to the conversion company who say their conversion has been approved as 'van qualifying' (i'm waiting to see evidence which they apparently have).

The vehicle has none opening glass behind the front two seats. The conversion involves the removal of the bulkhead which is replaced with a new bulkhead which can be 'folded' to create temporary seating.

Does this sound like it could make the difference required to be treated as a van for all 3 categories?

I'm told that this satisfies the 'where the load area is big enough compared with the passenger area to make the carriage of goods the main use of the vehicle' van test as this vehicles fails the 1 tonne test.

The client has come back with some more detail setting out why the conversion company say it definitely qualifies as a van.

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Replying to CWservices6064:
By alan.rolfe
06th Dec 2019 09:48

CWservices6064 wrote:

Some more details on this.

My client will buy the vehicles as 2 seaters and they will be taken to the conversion company who say their conversion has been approved as 'van qualifying' (i'm waiting to see evidence which they apparently have).

The vehicle has none opening glass behind the front two seats. The conversion involves the removal of the bulkhead which is replaced with a new bulkhead which can be 'folded' to create temporary seating.

Does this sound like it could make the difference required to be treated as a van for all 3 categories?

I'm told that this satisfies the 'where the load area is big enough compared with the passenger area to make the carriage of goods the main use of the vehicle' van test as this vehicles fails the 1 tonne test.

The client has come back with some more detail setting out why the conversion company say it definitely qualifies as a van.

Sounds promising for Income Tax/CA's purposes, but VAT is purely on the 1 tonne basis, so if that test is failed then it's not a van for VAT purposes.

The specific facts of the conversion seem important.

Firstly, it is not entirely clear whether this is a post-construction matter or whether the vehicle has been constructed with the bulkhead changes incorporated.

If it is part of the "original" construction then it is a judgement call on whether it makes the vehicle primarily for the conveyance of goods/burden (van) or whether carrying people has become equally important (car).

There seems to be two tenable arguments for a van - i.e. original construction does not include these extra seats or, alternatively, the seats are not enough to override the conveyance of goods being main use of vehicle.

Do you feel lucky?!?

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Replying to alan.rolfe:
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By CWservices6064
06th Dec 2019 11:38

..................it's such a grey area with a significant potential tax difference for a small co..............i don't feel lucky!

For VAT I thought there were two considerations one of which needs to be met:

1 It has a payload of more than one tonne after the extra seats have been added.
2 The dedicated load area (the load area that’s completely unaffected by the extra seats) is larger than the passenger area.

The conversion company have referred the client to point 2 as a basis for VAT recovery (I've advised the client to request a copy of any 'approval/advice' the conversion co have to support this).

The vehicles leave the factory as qualifying vans with the standard bulkhead and are sold to my client on this basis. The client takes them to the conversion company who swop the original bulkhead with theirs that includes the ability to 'fold' this to create temporary seating.

Any support for VAT claim?

Thanks for taking the time to look at this.

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By craig__2k4
06th Dec 2019 11:22

Does the Coca Cola case help?

https://www.tax.org.uk/policy-technical/technical-news/car-or-van-%E2%80...

https://www.accountingweb.co.uk/tax/hmrc-policy/when-is-a-van-actually-a...

"To establish whether the vehicle was “of a construction” for the conveyance of goods, it was necessary to determine if ‘construction’ meant the state of the vehicle when it left the factory assembly line or at the point following adaptations when it was supplied to the employee.

The UT accepted the FTT’s reasoning that what should be considered was the vehicle’s construction after adaptations.

The UT further accepted that removable items such as the seats in the Kombi vehicles should still be considered to be part of the construction of the vehicle. After all, many parts of a car, from the wheels upwards, can be removed."

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By meadowsaw227
09th Dec 2019 11:14

A client purchased one of these "purpose" built commercial land rovers.
It did not have any rear seats,but we still had a massive problem convincing HMRC that it was a commercial vehicle for vat and P11d purposes following a paye visit.
Convinced them eventually, however with rear seats it may have been more problematical ! .

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By john hextall
11th Dec 2019 09:35

These trucks are very useful as vans but there won't be much space left for cargo once the seats are added!

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By CWservices6064
16th Dec 2019 16:47

I have now been passed the 'evidence' that the conversion company has regarding HMRC opinion.

It's a HMRC letter saying............."having discussed the case with a Technical Inspector the decision is to advise that the installation of a new bulkhead with foldaway seats does not inherently change the purpose of the vehicle as the seats are not permanent. Such an addition on it's own would not affect the status of the vehicle for tax purposes."

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