Following HMRC’s announcement last week that double cab pickups would be treated as cars rather than vans for benefit in kind purposes from 1st July 2024 onwards, the UK Government has now made the decision to reverse all planned changes and withdraw the proposed new guidance.
Our employment tax team summarise the current situation surrounding the tax treatment of double cab pickups, including the initial announcement from HMRC and the reasoning behind the reversal.
Current tax treatment of double cab pickups for BIK purposes
To date, HMRC have interpreted the legislation that defines whether a double cab pickup is a car or a van in the same manner as the definition used for VAT purposes, i.e. a double cab pickup that has a payload of one tonne or more is accepted as being a van for BIK purposes.
This is advantageous to many as the BIK charge attracted by a van is typically much lower than a car, as it is calculated on a flat rate benefit value (currently £3,960) whereas company cars are taxed in accordance with their list price (including accessories) and carbon dioxide emissions.
Additionally, the rules surrounding private use of a car or van differ in that no taxable benefit arises in respect of a van where there is only incidental private use, whereas for a company car, availability for any private use of the vehicle such as home to work travel i.e. ‘ordinary commuting’ will trigger a taxable BIK.
Initial HMRC announcement on double cab pickup changes
On 12th February 2024, HMRC announced its plans to remove the favourable tax treatment of double cab pickups by updating the definition of cars for BIK purposes.
The UK tax authority released new guidance stating that any double cab pickups bought or leased would require an assessment to determine whether the primary suitability at the point the vehicle was made available to the employee was for ‘the conveyance of goods or burden’ (classifying it as a van from a BIK perspective).
HMRC clarified that where there were finely balanced cases in relation to primary suitability, the default would be that the vehicles should be classified as a car for BIK purposes. In relation to double cab pickups, as most of these types of vehicles are equally suited to convey passengers and goods with no predominant suitability, HMRC expected the majority of pickups to be reclassified as cars going forward from 1st July, with transitional arrangements lasting up to 5th April 2028.
Why has HMRC decided to u-turn on the changes to double cab pickups?
Following HMRC’s initial announcement on the tax treatment changes for double cab pickups, widespread concerns were expressed in the farming and motoring industries on the impact these changes would have on costs.
The Government responded late yesterday afternoon with a website update announcing the reversal of the planned changes, which acknowledged that “the resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the Government’s wider aims to support businesses, including vital motoring and farming industries”. The announcement also stated that the decision to u-turn simplified matters by providing consistency in vehicle classification across the different taxes – VAT, capital allowance and BIK.
It is important to remember that if double cab pickups have a payload of less than one tonne, they will still be taxable as cars (as is the current position).
The debate regarding car versus van remains ongoing, but employers will hopefully be reassured to know that the existing legislation and guidance will continue to apply for double cab pickups.
Staying compliant with tax changes
As yesterday’s u-turn demonstrates, tax legislation in the UK is constantly changing, making it increasingly difficult for employers to maintain compliance. Our employment tax team can help you stay informed of any changes in rules and guidance that could impact you and your employees, as well as ensure your existing employment policies remain up-to-date. Contact us today to speak to one of our specialists.
