a Van and a car

Is your van actually a car? – The answer may surprise you.

“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.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/428510/Car_derived_Van_updateMay2015.pdf 

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.

Classification

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.

https://www.judiciary.uk/wp-content/uploads/2020/07/HMRC-v-Payne-Ors-Approved-Judgment-002.pdf

We recommend that you review your fleet and make the necessary adjustments now.

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