ATT Technical Officer The Association of Taxation Technicians
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When is a van actually a company car?

26th Apr 2019
ATT Technical Officer The Association of Taxation Technicians
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Braking transporter

It might look like a van and you might call it a van but to calculate tax on a benefit-in-kind don’t assume that it is, in fact, a van. Helen Thornley explains how to tell a car from a van.

When an employer provides a vehicle which an employee can use privately, it matters whether the vehicle is a car or a van because the applicable income tax and NIC charges are very different. From both the employer and employee perspective, falling on the ‘van’ side of the line is far more beneficial.

But the definition of a van is not always clear-cut. In March, the upper tribunal (UT) upheld a decision of the first tier tribunal (FTT) that two apparently similar multipurpose vehicles provided by Coca-Cola to their employees were in one case a van and in the other case a car.

The law

For benefit-in-kind (BIK) purposes, cars and vans are defined by ITEPA 2003 s115.

A car is defined by what it is not – and it is not a goods vehicle.

A van, on the other hand, is a goods vehicle with a design (laden) weight of 3.5 tonnes or less.

A goods vehicle is then further defined as “a vehicle of a construction primarily suited for the conveyance of goods or burden of any description”.

The Coca-Cola case turned upon whether or not the three types of vehicle provided to employees were, or were not, goods vehicles. 

What was provided?

Up until 1997, Coca-Cola provided its technicians with estate cars. Then as more and heavier equipment was required, they moved to offering employees a choice of a ‘traditional’ panel van or a modified vehicle. It is for the latter vehicles where issues have arisen.

During the periods in question, three different modified vehicles were provided: a first or second generation VW Transporter T5 Kombi (Kombi) which were largely similar, and a Vauxhall Vivaro.

The Vivaro vehicle left the assembly line as a panel van and was subsequently modified by Coca-Cola to add a second row of two seats behind the driver together with a single window. The seats did not span the full width of the vehicle, leaving some storage space to the side. These extra seats could be removed, but only with tools.

The Kombi vans (both models) were also based on a panel van but arrived from the manufacturer with a second row of seats already fitted. This row spanned the full width of the vehicle, and there were windows on both sides. However, the whole row of seats could be removed without tools and it was a requirement that the seats were removed during working hours.

Both types of vehicle were further modified with racking and storage facilities for the transport of equipment.

In determining if these vehicles were goods vehicles, the tribunals looked in detail at two elements of the test: ‘of a construction’ and ‘primarily suited’.

Of a construction

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.

Primary suitability

The next stage of the test was whether each vehicle was primarily suited for the conveyance of goods. This requires the taxpayer to take a step back to view the position as a whole. The FTT had already noted that this was a finely balanced decision and the UT observed that it should be slow to interfere in such multi-factorial assessment.

Where a vehicle is equally suitable for both goods and passengers, then it has no primary suitability and thus cannot be a goods vehicle.

On this basis, the UT upheld the FTT’s decision that the Kombi vehicle was a car for the purposes of the benefit-in-kind rules. The FTT was entitled to conclude that the vehicle was equally suited to moving passengers or goods and had no primary suitability. This was in part due to the fact that the extra row of seats could be removed for goods or reinstated for passengers.

The UT also accepted the FTT’s reasoning that, on a fine balance, the Vivaro was slightly more suited for goods given the storage to the side of its second row of seats and thus remained a van.

A surprising outcome

So where does that leave us? If you look at pictures of both vehicles you will probably be confused. As tax advisers, we should be concerned about whether vehicles that look like vans from the outside are actually vans, and but we should also ask clients about what their vehicles look like on the inside.

That’s not all folks

Just because a vehicle is a car for BIK purposes doesn’t necessarily mean that it is a car for other taxes.

For VAT purposes, a car is a vehicle which, while being adapted solely or mainly for carrying passengers and with roofed accommodation to the rear of the driver, also has a payload of under one tonne. Any vehicle capable of carrying more than that will escape the car classification for VAT purposes regardless of its seating arrangements.

Replies (27)

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By thomas34
27th Apr 2019 08:54

An excellent article - thank you.

If the VW Kombi is a car just for BIK purposes, does this mean that AIA can be claimed or is one stuck with 18%/8% WDA?

Thanks (4)
By Mrbailey
28th Apr 2019 10:46

A van is a van
A car is a car

I rest my case.
Case dismissed
May the court rise

Thanks (0)
Replying to Mrbailey:
By thomas34
28th Apr 2019 11:32

Not really - that's the whole point of the article.

Thanks (5)
By Phi
29th Apr 2019 10:09

Where does this leave a double cab pick up, with a second row of seats behind the driver, and then an open or covered area at the back to carry goods. For Vat purposes, if it has a 1 ton payload then a van, but for BIK purposes, following the VW combi. it seems to fall into the "car" category

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Replying to Phi:
By Amanda6168
29th Apr 2019 10:42

Where indeed! We were advised that a Ford Ranger double cab would be acceptable as a van for BIK tax purposes and for VAT purposes as it can carry loads of 1T. This ruling seems to go against that advice in terms of BIK? Anyone know definitively?

Thanks (1)
Replying to Phi:
By bendybod
29th Apr 2019 10:40

That's been my understanding for the past few years.

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Replying to Phi:
By davisut
29th Apr 2019 13:18

According to HMRC Employment Income Manual (EIM23150), HMRC will continue to apply the VAT definition in respect of double-cab pickups for benefits purposes. That is, having a payload of 1 tonne or more (but beware of the pickups with a cover over the cargo area which may reduce the payload below 1 tonne). The manual makes it clear however that this only applies to double-cab pickups.

Thanks (3)
By JSJ54
29th Apr 2019 10:16

Well that arrived in the nick of time! Thank you Helen.

Less than half an hour ago a client sent me this

" I went down to the VW van centre at the weekend and im look at getting a Transporter van. Everyone I talk to say they are fantastic for putting against the business for Vat back and set against the company etc. The van I’m looking at does have seats in the back so I can use it personal BUT I will be using it for deliveries and repping but if its better to say it’s a poole car so I don’t pay any personal tax that would be better for me. It's a VW Transporter Kombi Highline Payload 945 kgs"

P.S. Ignore the pool car reference.

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By Nick Graves
29th Apr 2019 10:33

Oh, bloody hell.

Just when you think things cannot get more pedantic and confused, they do.

Potentially different treatment for AIA, BIK and VAT - let alone vehicle insurance purposes - it's got insane.

Thanks (6)
Replying to Nick Graves:
By alan.rolfe
29th Apr 2019 11:53

Nick Graves wrote:

Oh, bloody hell.

Just when you think things cannot get more pedantic and confused, they do.

Potentially different treatment for AIA, BIK and VAT - let alone vehicle insurance purposes - it's got insane.

My understanding is that for CA's purposes it is the Income Tax (BIK) definition that is followed and the VAT treatment does not impact the CA's position .... unless anyone knows better!?!

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By dmmarler
29th Apr 2019 11:46

This used to be so much simpler. It used to be governed by an SI which said something to the effect that if there were side windows behind the driver, then it was a car.

Why make life unnecessarily complicated?

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By pauljohnston
29th Apr 2019 12:08

I dont see whya windows behid the driver should make it a car. Depending on how you sit in the seat you need a window behind for reversing and also to check no one is overtaking.

The seats can be used for private and business. Often such a van is used to collect empoyees/subbies to take them to a site away from public transport or where there is restricted parking. Then again it could be used for the family.

The point to make the change is that of private use. Any private use and it is a car benefit. How this is enforced I have no idea. Except large penalty for lying.

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Replying to pauljohnston:
By cormocountry
29th Apr 2019 12:25

Well that business over side window was the old yardstick by which the definitions were drawn.. & was what a lot of (previous) UK vehicle manufacturers did to various line vehicles to suit that description..
The old Ford Escort panel van was one, & in later years, Land Rover built Discovery 1' s with blanked windows in the rear quarters & side-opening doors, but were allowed to leave the alpine light windows on the curve of the roof in place.. A 12-seater Land Rover ( with long bench seats in rear instead of four small folding ones) got past as a 'minibus' but the 10-seaters were an 'estate car..!
( seat belt law changes in later years kicked these definitions into touch & I would have thought positioning of the anchors for these for removeable-seat vehicles today would have also been question of what constituted car or van..)

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By [email protected]
29th Apr 2019 12:34

Great article- one of my clients bought a VW T6 Transporter without consulting me . The VW garage told him that it was a van, as they probably tell all their customers, who then get the unfortunate news that it is not a van for Income Tax purposes and thus, suffer the tax consequences. HMRC guidance is scant on their website.
However, the tribunals were considering a T5 combi so could a T6 be classified as a van? I doubt it as its probably the same method of construction.
Regarding the claim of A.I.A. presumably the 100% is not allowed and its the 8 / 18% C.A. that is claimable? Any one have any views / experience on this?

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By davisut
29th Apr 2019 13:26

Interesting point. In this case the FTT and the UT both decided that the term "of a construction" should apply to the nature of the vehicle after adaptation.
This contrasts the finding of the FTT in Jones v HMRC FTT (TC 1958), [2012] UKFTT 265 (TC); 2012 STI 2246, where a Landrover Discovery had been adapted to act as a goods vehicle. The tribunal in this case decided that, although the adaptation rendered the vehicle as more suited to be a goods vehicle, it was not originally constructed as primarily a goods vehicle, and therefore it was a car. HMRC's version of "heads I win, tails you lose"!

Thanks (3)
Replying to davisut:
By coolmanwithbeard
19th Jun 2019 12:02

If I remember correctly that one hinged on simply taking out the rear seats in a Discovery and calling it a van. It's original construction was car and 4 bolts to take out the seat didn't really change much. In the 60s and 70s you could convert say a minivan into a car just by adding windows and seats and then you had to pay purchase tax or later vat to get a car (& a higher speed limit). It's not as simple these days and even a sophisticated van with seats probably fails the construction and use rules for cars.

I think it is time that there is uniformity across different govt departments and taxes about what is what.

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By kevinringer
29th Apr 2019 13:36

I thought it hinged around the payload capacity. We've had this problem before with VW and ended up downloading the brochure from VW. Take for example, page 37 T30 Trendline: one has payload of 1003 kg and the other 973 kg so the first is a van and the second a car though the only actual difference is the first one is a 102PS 5-speed and the second 150PS 6-speed.

Thanks (1)
Replying to kevinringer:
By dmitchell
30th Apr 2019 09:51

The capacity determines whether or not the vehicle is a van or car for VAT purposes only.

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By Dandan
29th Apr 2019 13:42

This reminds me of the ridiculous VAT rules. For example, a chocolate chip cookie is zero-rated (as long as the chocolate chips are included in the dough or pressed into the surface before baking ). If ,on the other hand, the chocolate is just spread on top then it is std-rated.

There are hundreds of stupid tax rules and it is a mystery to me how they ever got legal backing. It does say something about those academics who make those rules but have never had a proper job

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By JSJ54
30th Apr 2019 08:34

I advised the client that the van was a car and he told the salesman who sent him this email

"I feel your Accountant is being ultra-safe, if you purchase a van, it is classed as an N1 commercial vehicle on the logbook and the Road Fund Licence is £260.00 p.a. If you make alterations to the van but it still has goods capacity i.e. load room it is still classed as a van. If you were to fill the rear with seats and replace all the panels with glass (like a Shuttle) that’s when HMRC pay more attention.
I have attached some brochure info, you will see the standard T6 T30 Kombi has a payload of 949kg but the Yellow Edition T30 has a payload of 1052kg (no spare wheel)
You have to be guided by your Accountant as he has to fight your corner with HMRC. The previous owner had told me his Accountant had given him the green light so it is really down to you for a decision."

I'm just about to tell the salesman that if I promise not to sell cars will he promise not to give tax advice.

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By Tom 7000
30th Apr 2019 08:59

….and with roofed accommodation to the rear of the driver...

If I take the lid off my convertible… Hey Presto! I am a van :)

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By rtrussell01
30th Apr 2019 09:25

Before 2008 HMRC were happy to use the same rules for VAT and Company car tax, so a van with extra seats and 1 tonne payload could escape with van tax rather than company car tax. Then around 2008 there was a tightening up of guidance and we saw the wording change on the website. There was no change in legislation, but on the examples we submitted it became clear that HMRC would now insist that any van, other than a doublecab pickup, would be subject to company car tax if it had more than one row of seats. The manufacturers did not help because all their brochures and websites for kombi style vans showed comfortable vehicles with families, bicycles, canoes, picnics etc etc being used in a non-business setting. So HMRC have a strong argument that such vans are not provided primarily to carry goods. And there has been little appetite to challenge their interpretation on any shape/style of van. So on Comcar and Vantax websites we have based the tax on how HMRC view these.
The company car tax treatment is particularly stark in this area for two reasons. Firstly the tax is usually higher on passenger vehicles, and secondly company car tax is payable as soon as a car is available for use, whereas a van driver pays no tax if private use is minimal.

Confusion also comes from the dealers who are expert on the VAT rules, but may not be aware of income tax implications. The rules are different, but at least there are clear rules on the VAT side. On Company car tax, it is still open to interpretation and the law is vague. However HMRC will insist on any company car tax it can.

Thanks (1)
By [email protected]
30th Apr 2019 17:59

One wonders what would happen if the manufacturer fitted some 'bayonet' load mounting points but would not supply seats ex factory? You could buy them as a dealer option but never as a factory option. As install/removal time would be a few minutes it would be hard to argue the vehicle has been adapted in any way.
(One of our clients has a 'commercial' Disco and a pack of parts which will go with it come the time to sell.)

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By Robin Wishart
19th Jun 2019 11:23

We have forester clients who work in very remote and frequently changing locations. They have purchased a camper van to reduce accommodation costs and to enable them to stay overnight on the work-sites, reducing travel time.
Clearly, the van is of a "construction" for providing mobile accommodation, not the transportation of goods. Does this make it a car rather than a van?

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Hele Thornley
By Helen Thornley
03rd Jul 2019 15:17

Following the article above, the ATT and CIOT have been considering the question of what the position is for earlier years and published the following today:
As a further complication, we have learned that the case is likely to go to the Court of Appeal.

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By smallvanman
12th Aug 2020 15:27

Where does this leave small vans with crew cabs? I'm looking to lease one for the engineers and none of them have a payload of over 1 tonne but all the dealerships are convinced I won't be stung. Please help!!!

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By Smokoe Joe
16th Sep 2020 13:19

"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."

That has got to be one of the most vacuous reasons ever given!

I think any person with half a brain would take it to mean parts that can be removed without affecting the integrity of the vehicle, its ability to drive and still be road legal!

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