Is it a car or is it a van?

Is it a car or is it a van?

For many years there has been a question of whether an employer provided vehicle should be treated as a van or a car for income tax purposes.

Why does it matter?

As most employees are aware, there is a personal tax liability they may have to pay for being able to use the work provided vehicle. This tax can be very different if that vehicle is a van compared to the rather punitive tax levied on company cars. When a company car is made available for the private use of an employee, a ‘benefit in kind’ value is calculated in relation to the car (and to the fuel if that is also made available for private use). The HMRC calculator found here can be used to quantify the taxable benefit. Use of a van from home can result in no taxable benefit if there is no other private use. However, being able to take a company car home every night is treated as private (taxable) use of the company car. If the van can be used for other private use, the benefit is based on a relatively generous scale rate (£3,490 and a fuel rate of £666 in 2020/21). This compares to much more scary benefits of £9,250 and £8,917 respectively for a diesel vehicle with an original list price of £25,000 and Co2 emissions of say 176g/km.

A van is a van right?

Well sometimes… unless it is a crew cab with seats behind the driver’s seat perhaps. This is the issue that was addressed by the Court of Appeal in its recent judgement against Coca-Cola when VW Transport T5 Kombis and Vauxhall Vivaros were deemed to be cars because the legislative definition of a van as ‘a vehicle of a construction primarily suited for the conveyance of goods or burden’ was interpreted to mean that it was first and foremost used for goods rather than people.

Have you assessed your vehicles?

All employers should review the types of vehicle given to employees, assess their use outside of work and how they should be classified in light of this judgement. A mistake could be very expensive for employers who could face penalties and interest for incorrect disclosure on P11d’s and payment of Class1A NIC’s. It would also damage the relationship with the employee who suddenly has to pay a lot more tax for being able to use the company van privately. If you have any questions relating to employer provided vehicles, please contact us.