Beware vehicle classification of double-cab pick-ups and kombi vans for tax relief

30th October 2017

With the space and functionality to be loaded with tools and equipment during the week, but the ability to carry family and shopping bags at the weekend, double-cab (kombi) vans and pick-ups can prove great, flexible vehicle solutions for small business owners. They also offer significant potential tax reliefs in comparison to company cars.tax of double-cab pick-ups

However, the classification of double-cab vehicles such as these for goods vehicle tax relief is a grey area, with many exceptions and conditions. We have written this article to highlight what to be aware of before choosing a double-cab vehicle for tax relief purposes.

Van tax reliefs

In the instance where a vehicle classifies as a van for the purposes of HMRC, there are a number of tax relief areas for which it qualifies.

Benefit-in-Kind Reliefs

Whereas cars are taxed on a sliding scale, based on a combination of list price and CO2 emissions, tax rates for vans are fixed depending on their usage profiles.

  • If the van is used for work and what is described by HMRC as “insignificant private use” then there is no tax to pay at all. This is because HMRC classes the van as having no Benefit-in-Kind (BiK), so it’s not seen as a taxable perk that’s provided to the driver by their employer or via their company.   “Insignificant private use” may sound open to interpretation but HMRC has a well-defined list of criteria to meet this statement. Essentially, commuting directly to and from work is covered, with the ability to stop off to pick up something or for the likes of a hospital appointment, but that is about the limit.
  • However, if the van is driven for what is defined as ‘Significant private usage’ the driver will be required to pay BiK company van tax. Regular shopping trips or school runs, or taking the vehicle out in the evening are all regarded as “Significant private usage.”

In the common instance where “Significant private usage” applies, there are still potential tax benefits to driving a van. For those qualifying vehicles, there is a fixed BiK rate for the driver, currently set at £3,230 for the current 2017/2018 year. This fixed rate is more favourable than the BiK rates typically calculated for company cars, which are based on their list price and CO2 emissions.

Compare the BiK tax rate of this Nissan Navara (classing as a van) to that of some other, popular company vehicles.

Model/Make Price CO2 BIK tax bracket 2017/18 Cost per month (20%) 2017/18 Cost per month (40%)
Ford Focus 1.5 TDCi Titanium Navigation £22,215 99g/km 21% £67 £134
Nissan Navara Visia 4WD £25,920 167g/km Flat rate £54.00 £108
SEAT Ateca £28,410 129g/km 27% £128 £256
Audi Q7 3.0-litre Quattro SE £52,910 158g/km 32% £267 £534

The total tax paid on the Navara is simply calculated at the driver’s personal rate of tax times the fixed BIK value. So, for a 20% taxpayer it is 20% X £3,320, which gives an annual total of £646 or £53.83 per month.

Drivers of vans also benefit from a fixed BiK rate for any private mileage fuel paid for by the company. For the 2017/2018 tax year this is set at £610 and, again, this is simply multiplied by the driver’s tax rate to calculate the amount due. This differs again from conventional company cars, which have a rate set at £22,600 for the 2017/18 tax year that is then multiplied by the car’s BiK tax percentage and the driver’s salary tax band – the same way company car tax is calculated.

Capital Allowance Relief

Vans also qualify for the Annual Investment Allowance, whereas cars qualify for Writing Down Allowance only, with cars with qualifying emissions not more than 75g/km entitled to 100% first year allowance.

VAT Relief

Input tax can be claimed on clans when used for commercial purposes but not on cars (except in very specific circumstances).

HMRC Vehicle Classification

For those owners of double-cab pick-ups and kombi vans, all of the above tax reliefs only apply if the vehicle, indeed, classes as a van or LCV. This is quite a grey area, and easy to fall foul of if you do not fully understand the HMRC vehicle definitions.

Definition of a “Car”

Whether a vehicle classifies as a van essentially depends on it not classifying as a car. HMRC currently defines a car as follows.

Motor car means any motor vehicle of a kind normally used on public roads which has three or more wheels and is either:

  • 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

But does not include:

  • Vehicles capable of accommodating only one person;
  • Vehicles that meet the requirements of Schedule 6 to the Road Vehicles (Construction and Use) Regulations 1986(c) and are capable of carrying twelve or more seated persons;
  • Vehicles of not less than three tonnes un-laden weight
  • Vehicles constructed to carry a payload* of one tonne or more;
  • Caravans, ambulances and prison vans;
  • Vehicles constructed for a special purpose other than the carriage of persons and having no other accommodation for carrying persons than such as is incidental to that purpose.”

Definition of a “Van”

It might seem obvious but, for the record, these are the criteria that HMRC uses to classify a vehicle as a goods van:

  • A vehicle primarily constructed for the conveyance of goods or burden;
  • A gross vehicle weight, fully laden, not exceeding three and a half tonnes

The key term in this definition is “constructed.” In short, it is not the actual use of the vehicle, but the purpose for which it was constructed and sold that matters.

For a vehicle to class as a van there are certain structural criteria that should be met:

  • The vehicle should have a significant load bay to carry goods such that the carrying of passengers can no longer be the main purpose;
  • The load bay of the vehicle must not have windows

 

When does a double-cab vehicle class as a van?

The ambiguity surrounding classification of double-cab pick-ups and car-derived (kombi) vans as goods vehicles comes from the addition of the second row of seats. This raises the question of whether the vehicle is “mainly for the carriage of passengers” or “primarily constructed for the conveyance of goods”. To help answer this question, HMRC considers that this type of vehicle is a commercial vehicle if it meets either of the following conditions:

  • The vehicle has a payload* of more than one tonne (after the extra seats have been added)
  • The vehicle has a dedicated load area (the load area that’s completely unaffected by the extra seats) that is larger than the passenger area. This means that the main use of the vehicle is for carrying goods rather than passengers

If it meets either of these conditions then the vehicle is a commercial vehicle and tax reliefs can be claimed. In a nutshell, if you can calculate your double-cab pick-up or kombi van payload to be in excess of one tonne, then you will most likely be able to class your vehicle as a goods vehicle.

HMRC have produced a list of kombi vans and double-cab pick-ups commonly in question – you can view the list HERE.

*(the difference between a vehicle’s kerb weight (as defined in the Table to regulation 3(2) of the Road Vehicles (Construction and Use) Regulations 1986) and its maximum gross weight (as defined in that Table))

Vehicle Modifications

When applying the one tonne payload condition, it is important to take into consideration areas of vehicle modification that may impact payload. For example:

  • Where a pick-up has an added hard top, this is given a generic weight of 45kg. Therefore a pick-up with a payload of 1010kg will convert to a car under these definitions.
  • Additional seats being added at a later stage will again affect the payload

 

Coca Cola vs. HMRC August 2017

A recent court case between HMRC and Coca Cola has added potential uncertainty to the classification of double-cab vehicles.  Although the impact has not yet been felt, it has raised some questions regarding the classification of double-cab vehicles and those concerned should keep an eye on any further developments.

taxation of kombi vans

In the court case of Noel Payne, Christopher Garbett, Coca-Cola European Partners Breat Britain Limited v HMRC [2017] TC06082 in August 2017, the FTT had to decide whether the VW Kombi and the Vauxhall Vivaro were cars or vans for the purpose of assessing employee benefits.

HMRC was of the view that the vehicles were both cars and therefore company car tax should be paid. Coca-Cola argued that they were vans.

In the end, the tribunal ruled that the Kombis were cars while the Vivaro classed as a van due to the significant cargo space available in the middle section. Importantly, both vehicles have two rows of seats and a payload of more than one tonne – thus this decision has brought potential new confusion to the rules surrounding classification of double-cabs.

 

How we can help

Our team at TTR Barnes has extensive experience in vehicle classification and associated tax reliefs. If you would like to understand more, please do not hesitate to contact us.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
to Accounts and VAT.