Car or Van?

Recent tax cases and appeals have meant that many in the tax faculty have had their eye on potential changes to the HMRC guidance in relation to pickup trucks for some time.

The rule has always been that a double cab pickup with a 1 tonne payload is categorised - for tax purposes - as a van.

HMRC jumped on this and earlier this year changed their tax specifications to reflect the fact that these pickups would officially be taxed as cars as of 1^st July 2024. Their justification was that 'typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.'

'Noooooooo!'

These proposed changes hit two industries hard: farming and automotive – and they fought back.

Many farmers use pickups as a multi-purpose vehicle, putting equipment and even livestock (including their dogs) in the back, while also using them as a family vehicle. They're an expensive purchase to start with, to add an increase in tax may make them an unnecessary drain on an industry that's already struggling to make ends meet.

The pickup is a popular vehicle and the landscape of the automotive industry would change overnight, with an inevitable and dramatic drop in sales. The longer-term picture could include thousands of job-cuts.

The proposed change hits every level in the motor trade, as someone in the commercial sales business commented “Every time I sell a van, I also sell a pickup for the family”.

To everyone's astonishment HMRC rapidly revoked the change.

The Green agenda

There's an election coming and, while this time the decision has been reversed, it almost certainly hasn't gone away.

Pickups have high emissions and, whichever party ends up in power, getting big vehicles off the road will help to bring the country nearer to carbon neutral. With their commitment to reduce the impact on the environment, taxing gas-guzzlers will make sense.

What about electric vans?

Good question – they do exist, but they are considerably more expensive than their petrol driven counterparts. From a taxation perspective it doesn't really make a difference as you already get full relief for the purchase of a van.

An odd anomaly is that pickups are taxed as a van from a VAT perspective (because the rules are different!), and that wouldn't change if HMRC change the benefit-in-kind rules.

While the current rules are too prescriptive and it would be better if tax was applied on an individual assessment, that's impossible to police.

What's the answer?

Currently, nothing has changed, but we believe that this issue hasn't gone away, it's just been put on hold. A similar revision of the tax situation is likely to be raised sometime in the not-too-distant future.

There are many issues that affect the best way to obtain vehicles for your business and personal use. To ensure you choose the right one for you – whether it's a car or a goods vehicle, you should talk to your accountant before buying any vehicle to ensure you get the right terms/arrangements.