At Crusader Vans we don’t just understand vans we understand the tax implications of leasing one or buying one for your business. We like to keep our customer up to date and a recent planned amendment to the taxation of double cabs and crew vans will be of interest to anyone considering such a vehicle as their next company car.
As of 1st July 2024, businesses in the UK need to pay close attention to the tax treatment of double cab pickups, as HM Revenue & Customs (HMRC) implements changes that redefine these vehicles for tax purposes. In this article, we’ll outline into the details of these changes, their implications for businesses, and the transitional arrangements in place.
Changes in Tax Treatment
Until 30th June 2024, HMRC followed a VAT-based approach to differentiate between cars and vans, categorising double cab pickups based on payload capacity. However, a recent court ruling in the case of Payne & Ors (Coca-Cola) v R & C Commrs (2020) BTC19 has prompted a shift in HMRC’s interpretation of the legislation defining cars and vans for tax purposes.
Court Ruling and Its Impact
The Court of Appeal’s ruling emphasised the importance of assessing a vehicle’s construction and primary suitability for the conveyance of goods or burden when determining its tax classification. The term ‘construction’ refers to how a vehicle is built, regardless of its appearance or usage. Additionally, ‘primary suitability’ requires demonstrating that a vehicle’s predominant purpose is for carrying goods, with a threshold higher than a marginal margin.
Implications for Double Cab Pickups
Under the new guidelines, most double cab pickups are likely to be classified as cars for tax purposes. This classification stems from their equal suitability for transporting both passengers and goods, with no clear predominance towards either purpose. As a result, businesses can expect a car benefit charge when calculating tax liabilities for these vehicles.
Transitional Arrangements
To ease the transition, HMRC has introduced transitional arrangements for businesses that purchased, leased, or ordered double cab pickups before 1st July 2024. These arrangements allow such businesses to continue applying the previous tax treatment until disposal, lease expiry, or 5th April 2028, whichever comes first.
Examples Illustrating Transitional Arrangements:
Let’s consider a few examples to understand how these transitional arrangements work in practice:
- Employer A purchased a double cab pickup on 14th September 2024. As the purchase occurred after 1st July 2024, the vehicle would be classified as a car, attracting a car benefit charge.
- Employer B leased a double cab pickup on 10th April 2024. Since the lease predates 1st July 2024, the previous tax rules continue to apply until lease expiry or 5th April 2028.
- Employer C purchased a double cab pickup on 10th July 2023, then traded it in for another on 1st November 2024. The previous rules apply to the first vehicle until the trade-in date, while the new vehicle falls under the new classification.
- Employer D placed an order for a double cab pickup on 5th January 2024 but received it on 2nd September 2024. As the agreement was made before 1st July 2024, the previous tax rules apply until disposal, lease expiry, or 5th April 2028.
Conclusion
Businesses leasing or purchasing double cab pickups must navigate these changes in tax treatment effectively to avoid unexpected liabilities. Understanding the criteria used to classify these vehicles and the associated transitional arrangements is crucial for compliance and financial planning. For further guidance tailored to your business’s specific circumstances, consulting with tax professionals or HMRC directly is advisable. Stay informed and stay compliant to ensure smooth operations in the evolving landscape of tax regulations.
If you are I guess if your reading this then you already have one, if your contemplating getting one as a company car then think again, or order it quickly. To find out more about this change contact the team at Crusader Vans on 01825 701 200 and we’ll happily help you make sense of it.
