TWC Update 31/08/2020

The
result of the case

•     The Court of Appeal found in favour of HM Revenue & Customs
  (HMRC) that certain types of modified crew cab vehicles should not be classed
  as ‘vans’ for income tax and national insurance purposes but as cars instead.

What
does the tax legislation say a van is?

•    It is a goods vehicle and has a design weight not exceeding 3,500
  kilograms and is not a motor cycle. 
•    A ‘goods’ vehicle is defined as one of a construction primarily suited for the conveyance of
  goods or burden of any description.

What
important points came out of the Court of Appeal ruling?

•    When deciding whether it is a ‘van’ or a ‘car’ it is not the original design of it but
  the construction/adaptation of it when it is made available to the
  employee.
•   Although the look of the vehicle is a factor, it is not a
  significant one.
•   The fact that a vehicle is used for private purposes is, in
  itself, irrelevant in deciding whether or not, for income tax/NI purposes, it
  is a ‘van’.
•    The importance is whether or not the vehicle fits the definition
  of a ‘car’ or a ‘van’.
•    The Court placed great emphasise on what is meant by ‘primarily’ suited for the
  conveyance of goods.
•      The Court felt that multipurpose vehicles would be deemed to be a
  ‘car’ if the construction of the vehicle, when looking at it as a whole, was
  only ‘marginally’ in favour of it being a goods vehicle than a car. ‘Primarily’
  means more than that.     
•    The three vehicles in question were originally constructed as
  panel vans but were modified.
•    One vehicle was modified to incorporate a second row of seats
  which could be removed (using tools) and a window added at the side of the
  seats.
•   The other two vehicles already had a second row of seats,
  removable (without using tools), with windows either side of them, behind the
  driver and front passenger seat. Racking was required to be installed by the driver when the
  vehicle was used on business.
•    All 3 vehicles were modified to provide added protection for those
  sat in the second row of seats to prevent loose items from entering their area
  if the vehicle had to brake suddenly.  

Why does
it matter whether a vehicle is classed as a car or a van for tax purposes?

•    The current benefit it kind charge for a ‘van’ is £3,490 (£2,792 –
  no CO2 emissions).
•    If treated as a ‘car’, the benefit in kind charge could be
  considerably higher as it is normally calculated based upon the car price
  graduated according to the level of CO2 emissions.
•   If regarded as a ‘car’ this could have a knock-on negative impact
  on the level of Class 1A national insurance for a business to pay.
•   If private fuel is paid for by the business, the car fuel benefit
  in kind figure is likely to be considerably higher than the fixed van fuel
  charge of £666 where CO₂ emissions come into play.
•   Vans are potentially eligible for the annual investment allowance whereas
  cars are not. Capital allowances relief is likely to be spread over a longer
  period for cars.
•     Input tax can be claimed in part or in full on the purchase of a
  vehicle classed as a ‘van’ for VAT purposes, but the recovery is generally
  blocked if a car is purchased, where private use maybe involved.  

It is
worth knowing

•    It is worth noting that, a combi-vehicle with a payload of 1 tonne
  or more is not a car for VAT purposes.
•    Double cab pickups (but no other type of dual-purpose vehicle),
  HMRC accept that where the vehicle meets the ‘van’ payload test for VAT
  purposes, they will apply the same treatment for benefit in kind purposes.
•    HMRC produced a list of combi vehicles which they felt were, for
  VAT purposes, either a ‘car’ or a ‘van’. The list has not been updated since
  May 2015. See below for a link to the list.

Looking
forward

•    If Coca Cola don’t appeal against this judgement, we expect HMRC will
  review all those employees with ‘vans’. Worst case scenario is that they could
  try and open up earlier years where they believe they can apply this precedent.
•    In light of the Coca Cola case, I would be perhaps be reviewing my
  employees to see who have been declaring the ‘van’ benefit and making them
  aware of the result of the Coca Cola case and the potential repercussions of
  it.
•    Some vehicles will be clear cut panel vans or fit the
  double-cab HMRC concession. But will some have been adapted from the original
  construction to include such things as additional seats and side windows? Will
  they now no longer be ‘primarily
  suited’ for the conveyance of goods?