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HMRC changes tax interpretation of Double Cab Pickups

15th Feb 2024
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As a highly-respected sub-contractor and intermediary in the contractual chain, The Guild strategically places itself between its clients and sub-contractors.  

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From 1 July 2024, HMRC will no longer interpret the car and van benefit legislation in line with the definitions used for VAT purposes when looking at whether a double cab pickup is a car or a van for tax purposes.

Double cab pickup image
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Since 6 April 2002, a double cab pickup that has a payload of 1 tonne or more has been accepted as being a van for taxable benefits purposes whereas if the payload is less than 1 tonne then it is considered a car and treated differently when calculating the benefit in kind tax position.

Under the van benefits legislation, a company van can be taken home by an employee and, providing the vehicle is not used for any other private purpose (except to an insignificant extent) and has been made available to the employee primarily for their business travel, the van taxable benefit charge will be nil. Even where these conditions are not met and a van benefit charge arises, the charge is calculated at a standard rate which is set each tax year.

This van benefit scale rate is usually much lower than a normal car benefit charge, which is calculated using specific information, starting with the vehicle’s manufactured list price plus any qualifying accessories. The benefit charge arises on the car being available for private use, meaning it does not even have to be used privately.

Clearly, there can be a significant tax advantage in choosing to have a double cab pickup as your company vehicle when compared with a traditional car.

With effect from 1 July 2024 the tax treatment of double cab picks will now need to be considered by determining whether it meets the tax definitions of a car, or a van as set out in the benefits legislation. To qualify as a van, it will need to satisfy the construction and primary suitability tests within Section 115 ITEPA 2003, as defined by the Court of Appeal decision in Payne & Ors (Coca-Cola) v R & C Commrs (2020) BTC19; that is, it is a vehicle of a construction primarily suited for the conveyance of goods or burden of any description.  Double cab pickups that do not meet these tests will no longer satisfy the definition of a van and, for benefit purposes, will be a car.

Transitional arrangements will apply where an employer has purchased, leased, or ordered a double cab pickup before 1 July 2024. In these instances, employers can rely upon the previous tax treatment in place from 6 April 2002 to 30 June 2024 until the earlier of the date of disposal of the vehicle, the expiry date of the lease or 5 April 2028.

This new approach by HMRC will undoubtedly put greater pressure on employers that provide company vehicles to employees to understand the complex and technical approach needed to correctly establish how a vehicle like a double cab pickup falls within the benefits legislation.

The impact of incorrectly treating a car as a van could have significant implications on taxable benefit calculations, in particular when the vehicle comes with employer-funded fuel.

 

If you would like to raise anything we’ve discussed in this article, please contact us at [email protected] and talk to our expert team. We’re here to help.

How can The Guild help?

The Guild has in-house ex-HMRC Employer Compliance and CIS experts who can help you with an HMRC enquiry, whether at the outset of the review or at a point where HMRC demands are escalating.

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The content of this article is for guidance only and shall not constitute advice. Please seek independent advice or contact The Guild for information about its services.

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