When is a van not a van?
Sep 12, 2019
For some time now there has been a good deal of confusion surrounding the classification of vans for tax purposes. HMRC are now being urged to provide clarity and consistency on the tax treatment of commercial vehicles such as VW Kombi Vans, which are marketed as goods vehicles. This need for clarity has arisen following the ruling upheld in an important tax tribunal case, which involved ‘vans’ provided to employees of Coca Cola.
The court upheld HMRC’s view that certain vehicles are not in fact goods vehicles, but should be classed as motor cars for benefit in kind purposes. Consequently, the income tax and national insurance payable by the employee and employer is significantly higher than if the vehicles had been classified as goods vehicles.
Certain vans are exempt from income tax
When a van is only used for business journeys, or the private use of the vehicle is insignificant, then there is no assessable benefit in kind. Examples would include making a slight detour to pick up a newspaper on the way to work, or taking an old mattress or other rubbish to the tip once or twice a year. For these purposes commuting from home to work is deeded as a business journey.
Income tax definition of ‘goods vehicle’
The income tax legislation defines a goods vehicle as ‘a vehicle of a construction primarily suited for the conveyance of goods or burden of any description…’
Although the VW Kombi vans failed this test, the tribunal held that the Vauxhall Vivaro vans provided by Coca Cola did fall within the definition of goods vehicles!
It is understood that this case is due to be heard at the Court of Appeal which will provide legal precedent over the tax treatment. Until then employers have a dilemma about to how to report such vehicles on their employees’ P11D form, and also whether the position in earlier years should be rectified. The fact that the tribunal had to seek evidence from experts in the automotive industry proves just how tough it is for employers to interpret the rules!
What is also particularly confusing, and thus difficult for businesses to deal with, is that the benefit in kind rules are not the same as the rules for capital allowances and VAT.
Capital allowances definition of a ‘motor car’
The definition of a motor car for the purposes of plant and machinery allowances is a ‘mechanically propelled vehicle’ which is not:
- constructed in such a way that it is primarily suited for transporting goods of any sort, or
- of a type which is not commonly used as a private vehicle and is not suitable for use as a private vehicle.
VAT definition of ‘motor car’
For VAT purposes the definition of a motor car has been amended several times over the years. The current definition states that a motor car means ‘any motor vehicle of a kind normally used on public roads which has three or more wheels’ and either:
- is constructed or adapted solely or mainly for the carriage of passengers; or
- has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows.
There are a number of exceptions to this rule, notably vehicles constructed to carry a payload of one tonne or more. A common example would be a ‘double cab’ pick-up, such as a Mitsubishi L200 or Toyota Hilux.
If you have any queries about the tax treatment of motor vehicles then please get in touch with a member of the PT team and we’ll be happy to help.