HMRC’s Updated Guidance on Double-Cab Pick-Up Trucks: What You Need to Know
From 1st July 2024, the UK’s HM Revenue and Customs (HMRC) will change how double-cab pick-up trucks are classified for tax purposes, marking a significant shift from the existing rules. This update, detailed on the HMRC website, follows a decision by the Court of Appeal in the case of Payne & Ors (Coca-Cola) v R & C Commrs (2020), which has led to a reevaluation of the vehicle classification system under the tax code.
Key Changes Explained
Previously, the classification of a vehicle as a car or a van for tax purposes aligned with the definitions used for VAT, based primarily on payload capacity. Vehicles with a payload under one tonne were classified as cars, while those with a payload of a tonne or over were considered vans. This pragmatic approach allowed for a straightforward distinction between cars and vans, especially for double-cab pickups.
However, from July 2024, HMRC will no longer use the VAT definitions for tax purposes. The Court of Appeal’s judgement clarified that the primary suitability test at Section 115 ITEPA 2003 should not hinge on narrow margins. In cases where a vehicle’s suitability for carrying goods is not predominantly clear, it will default to being classified as a car.
This means most double-cab pickups will be classified as cars for the purpose of calculating benefit charges from July 2024, as these vehicles are typically suited both for carrying passengers and goods without a clear primary function.
Transitional Arrangements
Recognising the impact of these changes, HMRC has introduced transitional arrangements for employers who have purchased, leased, or ordered a double-cab pickup before the 1st July 2024. These entities can rely on the previous tax treatment until the earlier of disposal, lease expiry, or 5th April 2028.
Examples Provided by HMRC:
- Example 1: A double-cab pickup purchased on or after 1st July 2024 will be classified as a car, triggering a car benefit charge.
- Example 2: A vehicle leased before 1st July 2024 will continue under the old rules until the lease expires or until 5th April 2028, whichever comes first.
- Example 3: A double-cab pickup purchased before 1st July 2024 but traded in after this date for another will see the new vehicle classified as a car under the new rules, with a car benefit charge arising.
- Example 4: An order placed before 1st July 2024 but delivered after will still benefit from the old rules until disposal, lease expiry, or 5th April 2028.
These changes underline the importance of careful planning for businesses relying on double-cab pickups. The transitional arrangements offer some leeway, but companies should consider the long-term implications of these classification changes on their fleet and tax liabilities.
What’s Next?
This update from HMRC marks a crucial turning point for businesses utilising double-cab pickups. Companies should evaluate their fleet strategy in light of these changes and consider how it might affect their Benefit in Kind (BiK) tax liabilities.
If you need any help or advice please do not hesitate to contact Holden Associates.
Updated 20 February 2024 click here.
