Certain types of crew cab vehicles are classed as a 'van' rather than 'cars' for income tax and national insurance purposes. Over the years, there has been a number of discussions and court cases with HMRC surrounding the classification of what 'van' actually means.
Some vehicles are capable of carrying both goods and people. A 'goods vehicle' means one whose primary construction purpose is to carry goods or burden. HMRC accept that, amongst other criteria, a double cab pick-up (DCPU) will be a van if it has a payload capacity of 1 tonne or more – otherwise it will be a car.
What were the proposed changes?
On 12 February 2024 HMRC updated its guidance on the tax treatment of double cab pick-ups. The guidance stated that from 1 July 2024, all double cabs with a payload of 1 tonne or more would be treated as cars rather than goods vehicles for benefit in kind (BIK) purposes.
The new rules were due to apply to all double cab pick-ups ordered after 1 July 2024 – any vehicles already on fleet or ordered before July would still be subject to the existing classification until April 2028.
The policy U-turn:
Following backlash from farmers and the motor industry, including the feedback from the Society of Motor Manufacturers and Traders (SMMT), the government has decided to withdraw the new guidance just over a week after the initial announcement. On 19 February 2024 updated guidance was posted on HMRC's website. HMRC concluded that the proposed change from July 2024 would impact businesses and individuals in a way that is not consistent with the government's wider aims.
Consequently, double cab pick-ups will continue to be treated as goods vehicles rather than cars, and businesses and individuals can continue to benefit from the historic tax treatment.
Nigel Huddleston, Financial Secretary to the Treasury, said: "We will change the law at the next available Finance Bill in order to avoid tax outcomes that could inadvertently harm farmers, van drivers and the UK's economy."
Concerning the tax year 2023/24 vans provided to employees for private use will attract a flat rate benefit in kind (BIK) of £3,960 (reduced to zero if it is classed as a zero emissions vehicle). In addition, a separate van fuel charge applies if the employer meets the cost of fuel for private travel. This is set at £757 for 2023/24 which is then subject to tax for both the employer and employee.
The U-turn will be a relief to many and certainly welcomed by our clients within farming and construction. Should you require any further detail on HMRC's guidance or need assistance with determining vehicle classification for tax purposes, please use the form below to contact one of our experts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
