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Business Services  •  Business Tax  •  HMRC  •  Small Business  •  Tax Planning  •  Taxation

Vans redefined as cars. What are the vehicle tax implications?

By RJP LLP on 27 August 2020

In the recent case of Payne, Garbett and Coca-Cola European Partners Great Britain Ltd vs HMRC it was upheld that some modified ‘crew-cab’ vehicles supplied by Coca Cola to its employees for use were actually cars and not vans for tax purposes. This resulted in employees being taxed as a higher benefit in kind charge on the vehicles supplied.  

However there are other tax implications to consider with vehicles being reclassified as cars rather than vans. These implications are:

Capital allowances

Vehicles classed as vans are treated as plant and machinery and eligible for the annual investment allowance (AIA). A car is also be eligible for capital allowances, but may not be eligible for AIA, which allows the tax relief to be written off more rapidly.

Eligibility depends on the vehicle’s CO2 emissions and whether the vehicle is ‘of a construction primarily suited for the conveyance of goods or burden of any description’. In Coca Cola’s case, the crew-cabs were deemed cars and previous capital allowances claims made may need to be reviewed.

VAT

If a vehicle is classified as a van for tax purposes it is possible to recover the VAT on the purchase price, something not generally available on a car purchase. Typically, the definition of car vs van is based on whether the vehicle has seats behind the driver together with side windows.

There are exceptions the main one being if the vehicle can carry loads of one tonne or more then it is deemed a van for VAT purposes only.

If you are purchasing a vehicle and are unsure as to whether it is a car or van for tax purposes, then please contact partners@rjp.co.uk

There are wider implications to consider which include personal tax, national insurance, VAT and corporation tax.

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31 December 2020 - Review disposals of chargeable assets to avoid a possible CGT increase

Capital gains tax is due to be reviewed by the government and if a CGT rise is announced, the new rates may become effective from the next tax year on 6 April 2021. Take advice now if you are thinking of selling property or have other assets giving rise to a capital gains tax liability.