19/02/2024

Tax

Changes to Commercial Vehicles
for Tax Purposes

 

**UPDATED 21/02/24**

Only a week after HMRC released new guidance that classed double-cab pickups as cars rather than vans for employment tax and capital allowance purposes, the government has now performed a U-turn and has reversed this decision. HMRC has said double cab pickups will continue to be treated as goods vehicles rather than cars, so businesses and individuals can continue to benefit from the historic tax treatment. However, double cab pickups with a payload of less than one tonne will continue to be treated as cars.

The proposed changes were due to come into effect from 1st July 2024, however Government has listened to feedback following the announcements relating to double cab pickups, and confirmed that the proposed changes were not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.

**Read the original proposal below**

Overview

The dual-use nature of double-cab pick-ups means they straddle an area between commercial vehicles (i.e. vans) and passenger cars. Historically, HMRC has judged that these vehicles with a payload in excess of one tonne are closer to commercial vehicles than private cars, and therefore attracted desirable tax benefits.

With effect from 1st July 2024, the definition of a van for most taxes is changing. HMRC hasn’t changed the definition of a van in terms of VAT. For VAT reasons, a vehicle with a payload exceeding one tonne is still considered a van. A van for VAT purposes continues to be a vehicle with a payload over one tonne.

Going forward, it will be necessary to classify double cab pickups by evaluating the vehicle as a whole at the time that it is made available to determine whether the vehicle construction has a primary suitability for the conveyance of goods or burden of any description.

It therefore follows that from 1 July 2024 most, if not all, double cab pick-ups will be classified as cars when calculating the benefit in kind tax.

Double Cab Pickups, Commercial Vehicles and Vans VAT and Tax Changes

What is a double cab pickup?

A vehicle of this sort normally has:

  • a front-passenger cab that contains a second row of seats and is capable of seating about 4 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 pickup area behind the passenger cab.

What does this mean for me?

At the moment, the benefit in kind for drivers using a double cab pick-up (e.g. a basic Ford Ranger) as a company vehicle is based on a fixed rate of £3,960. Meanwhile, any extra benefit in kind for fuel is based on a fixed rate of £757 per year.

Whereas, the benefit in kind for the provision of a car is based on the vehicle’s list price and its CO2 emissions. The higher the CO2 emissions of the vehicle, the higher the benefit-in-kind multiplier percentage. For the fuel benefit in kind for cars, this is determined by the CO2 multiplier to a fixed figure of £27,800. Please refer to the example below to show the difference in tax liabilities under the new rules. This is based on a double cab pick-up with a list price of £40,000 and CO2 emissions of 160km/g.

With regards to capital allowances, a double-cab pickup will be considered a car rather than a van from 1st July 2024, so depending on whether it’s new or second-hand, and its level of CO2 emissions, it may not qualify for annual investment allowances or full expensing as a van usually would. 

Transitional Arrangements

Employers who ordered, leased, or bought a double cab truck before July 1, 2024, will be subject to transitional arrangements, allowing them to continue using the current method until the sooner of 5 April 2028, the lease’s expiration, or disposal.

If a double cab pick-up has been ordered before 1st July 2024, but not made available to an employee until after that date for any reason, then the transitional rules still apply.

What can I do?

  • There are a few things you can do to avoid the changes
  • Purchase / renew the lease / order a double cab pick-up before 1st July 2024.
  • Use a single cab pick-up as these still be accepted as a commercial vehicle.
  • Look at using an electric or low-emission double cab pick-up.

Look at HMRC’s article:
Car Benefit: double cab pickups

To learn more about company cars, mileage and tax, check out our popular article:
10 Legal Ways to Reduce Your Corporation Tax Bill in the UK

Read our latest tax recommendations:
Pay Less Tax Winter 2024 Edition