Date posted: 2nd Nov 2020
The Court of Appeal has agreed with prior tribunal rulings that means that certain vehicles will be treated as cars, instead of vans, for tax purposes.
What was the HMRC challenge?
In what has historically been a grey area, the HMRC challenge was in relation to the definition of a van – “a vehicle of a construction primarily suited for the conveyance of goods” – the contra being if the vehicle does not meet this definition, the vehicle is usually treated as a car, for tax purposes. The latter, in more cases that not, involves higher tax and national insurance liabilities.
In this particular case, the vehicles provided by the employer were modified (second rows of seats were added) and the Court of Appeal focussed on the build of the vehicle when it was provided to the employee. The Court of Appeal has determined that such vehicles are multi-purpose vehicles (capable of carrying goods and people) and none of them are ‘van-like’ enough. They therefore fall to be treated as cars, for benefit-in-kind purposes.
A sting in the tale for double cap pickups?
Whilst the case concentrated on “modified” vans, it seems clear that multi-purpose and double cab vehicles will be on the HMRC radar. If a vehicle that was originally a van and then was converted to add extra seating is re-classified as a car, then a vehicle factory built with a second row of seating seems even further away from the definition of a van.
Given that the result from the Court of Appeal is binding, this causes significant uncertainty, particularly in relation to the classification of multi-purpose and double cab vehicles. Therefore decisions need to be made by employers in relation to:
- Earlier years’ P11D’s.
- 2020/21 P11D’s.
- Whether to change the vehicle to avoid the uncertainty going forward.
- The risk of a PAYE enquiry from HMRC, particularly at a time when they are looking at increasing tax revenue.
It is entirely possible that an appeal may be made to the Supreme Court but this is unlikely to be heard in the near future.
Please give us a call, if you require tax advice in relation to the company fleet or contact the tax team here.
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