When is a van not a van? - Article Kelso : Rennie Welch

When is a van not a van?

For an ordinary person standing at a busy roadside it would appear that most vehicles can be quite readily distinguished as being cars or vans. The clear cut cases are the obvious passenger vehicles, or a box style of van intended to carry goods. In the world of tax there is a however a huge distinction in treatment, with classification between the two becoming increasingly troublesome and a potentially large tax cost for getting it wrong.

The tax disadvantages of traditionally employer provided company cars and fuel have gathered pace in recent years, to the extent that many no longer consider the car a worthwhile perk and a side effect is that many owner managed businesses and employers instead look at commercial vehicles or vans, where possible, as a more tax efficient alternative.

In addition, it is common in the trades and construction industry for employees to be allowed to take vans home from work.

These are areas of increasing interest for HMRC on employer compliance visits and reviews. This kind of HMRC intervention on payroll matters can often prove troublesome and expensive, with any flaws in the treatment by businesses of workers and their employment arrangements resulting in significant liabilities, compounded over a number of years.

The van aspects of greatest interest are whether the vehicles provide to owners are actually vans at all and for employees whether a taxable benefit arises on vans with private use.

For business owners, double cab pick up type vehicles can be an attractive alternative to a car. The vehicles often carry a far lower Income Tax burden than a car. A high value and specification double cab pick up has the same taxable benefit value of £3,230 (plus £610 for fuel) as a standard box or car derived van provided for private use. The personal tax charge on this value of ‘perk’ of having the company own, run and provide the vehicle is often far preferable to much higher car and fuel benefit charges.

The problem comes with the blurring of whether a double cab pickup is a car or a van. The current position is HMRC will accept a double cab pickup is a van provided the payload capacity is over one tonne (1000 kg). Care should be taken that this capacity is the net payload after deducting any hard cover. For example if a hard top is added to a pick up with a payload of 1010kg, this will reduce the net payload to under the requisite 1000kg, converting the vehicle into a car, with a hugely higher taxable benefit value!

Another area in which HMRC have seen recent success is with multi purpose ‘Kombi’ type vans. In a Tax Tribunal case taken against Coca Cola, it was found that a Vivaro type vehicle is ‘primarily a goods vehicle’ but a Kombi is not and should be treated for benefit purposes as a car. The distinction was the greater cargo space in the Vivaro, meaning the primary purpose of the vehicle construction is to carry goods.

An additional tax concern is the concept, often in the construction sector, of employees taking vans home. In this instance we are talking about vehicles which are clearly commercial, perhaps transit or box type vans, often sign written with the name of the employer. The question here is not whether the vehicle is a van but instead how it is used.

Many employees can take a van home without suffering a taxable benefit. This is the case whether the van is used for work journeys and ‘ordinary commuting’ to and from work. Other ‘insignificant’ private use can be disregarded. This is a rather subjective term but HMRC guidance refers to only very limited circumstances, such as taking rubbish to a tip once or twice a year or a slight detour for a school run. The situation could be clarified with mileage records or restrictions placed on use of the vehicle. We would expect an HMRC employer compliance officer would consider the regular appearance of a sign written van in the local supermarket car park or at weekend clubs, as a particularly easy target for a taxable benefit!

Should you require a review or any assistance in considering the arrangements of your business on providing commercial vehicles to directors or employees, please contact Mark Thompson on 01573 224391 (Kelso), 01289 541988 (Berwick), 01896 822729 (Melrose), or email mark.thompson@renniewelch.co.uk

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