“Should I buy a car or a van” is a question we frequently get asked at 1 Accounts. Our recommendation is usually van. This is because you can claim back the VAT and the taxable benefit in kind is usually much less than a car (unless electric).
As the benefits of buying a van outweigh the benefits of buying a car, It is important that your van is actually classified as a van. In our opinion HMRC have been fairly “woolly” over the definition. In most cases if the vehicle is capable of transporting goods and has a 1 tonne pay load it has been treated as a van.; regardless of if there are seats behind the driver.
HMRC have a published list of what they determine to be a car or a van. You will see in some cases that the pack purchased can affect the classification: However due to the developments in the recent Coca-cola case these classifications may come under scrutiny from HMRC.
The coca-cola case
Coca-cola provided their employees with vehicles based on a panel van design, however these vehicles had a second row of seats behind the driver. Employees could use them for both personal and work purposes. Coca-cola argued that these vehicles were vans. HMRC said they were cars.
The first tier tribunal determined that because the vehicles were multi-purpose they couldn’t be considered a van. Therefore by default they had to fall into the ‘car’ bracket and should be taxed accordingly.
Your van could be classed as a car if:
- It has a row of seats behind the driver
- It has a dule purpose eg. It can carry goods and passengers
If you van has these things you will seriously need to consider if it is used as a van or a car. We believe that now it has come to light, HMRC will be looking more closely at the classifications and will be taking a much harsher approach than before.
The judgement as you can see from this link is extensive and has tax implications for both Tax and VAT.
We recommend that you review your fleet and make the necessary adjustments now.