by Greystone
Posted On : 2020-09-04
The tax treatment of cars and vans is quite different, with van
classification far more beneficial from both an employer and employee
perspective. However, the distinction is not always clear-cut, especially where
vans have been modified to turn them into multi-purpose vehicles.
The Court of Appeal has ruled that three
modified crew-cab vehicles provided by Coca-Cola to its employees, who used
them privately, are cars rather than vans, despite the vehicles having the
outward appearance of a van.
Modification
The three vans in question were panel
vans modified with a second row of seats behind the driver, turning them into
crew cabs. With two of the vehicles, the additional seats could only be removed
with tools. For the other vehicle, the seats were removed during working hours.
Primarily suited
For benefit purposes, classification as
a van depends on a vehicle being primarily suited to the carrying of goods.
The Court of Appeal’s view was that the
modifications had transformed the three vans into multi-purpose vehicles,
equally suitable for carrying either goods or passengers. Not being primarily
suited to the carrying of goods, the vehicles therefore did not qualify as vans.
What a vehicle looks like on the inside
overrides its outward appearance.
The decision could also see crew cabs
reclassified for capital allowance purposes (so no annual investment
allowance), but still considered vans for VAT purposes provided they can carry
a payload of one tonne or more.
Implications
Employers should be aware of the tax
implications of providing similar modified crew cab vehicles where private use
is permitted.
The decision will mean a higher benefit
charge for employees, and additional class 1A NICs for employers. The change
should be applied from 2020/21 onwards, and also potentially backdated to
2018/19 (when the case was heard at the Upper Tribunal).
HMRC guidance on the difference between cars and vans for car benefit purposes can be found here.
This remains a highly technical area of taxation and many businesses are caught out by the lack of understanding. It is therefore important to seek expert advice before making a decision.