Chris Thorpe reviews the position of vans and benefit-in-kind charges in light of the recent Court of Appeal case which held that VW Kombis and Vauxhall Vivaros are actually cars.
You’d think you’d know a van when you see one – it’s a van, after all!
Vans vs cars: The tax angle
Being a van is great as far as the income tax benefit-in-kind rules are concerned; the level of the taxable benefit on private use availability is a fixed amount (i.e. £3,490 in 2020/21) with fuel likewise at a flat £666.
Tax on cars and fuel is far more punitive; a list price applied to a percentage based on its carbon dioxide (CO2) emissions; the fuel rate uses the same percentage applied to a fixed rate (£24,500 in 2020/21). So there’s an obvious advantage to a vehicle being a van rather than a car. It’s not just income tax where vans have a distinct advantage; they attract VAT recovery (using a criterion of a one tonne+ payload) and are subject to main rate capital allowances write down allowance and the annual investment allowance.
So you think it’s a van?
Therefore, if you bought a VW Kombi 1 or 2, or a Vauxhall Vivaro (all of which everyone would call ‘a van’), you would probably think that you could benefit from this tax treatment. But wait...
A case has recently emerged from the Court of Appeal concerning these vehicles. In Noel Payne, Christopher Garbett & Coca Cola European Partners GB Ltd v HMRC [2020] EWCA Civ 889, the Court upheld HMRC’s arguments that all those vans were actually cars for benefit-in-kind purposes. However, they were accepted as vans for VAT purposes.
The First and Upper-tier Tribunals had held that the Vauxhall was a van, but the VWs were cars because they had rear windows and removable rear seats (and are called Kombis, alluding to a ‘combination’ of some sort!) and therefore the primary purpose was not that of conveying goods – that was merely a purpose.
However, the Court of Appeal allowed HMRC’s cross appeal that the Vauxhall also fell into that category and dismissed the taxpayers’ appeals, holding that the Vauxhall was too similar to the VWs to be categorised as a van.
Key consideration
A crucial point that the court made was that you don’t just look at the vehicle’s construction per the statute; you look at what other retro modifications have been made; actual use is irrelevant as is the description given by the manufacturer or dealer. The presence of windows behind the driver and ability to fit passenger seats was lethal to a claim that a vehicle is a van.
What about double-cab pickups? For example, a Land Rover 110 or Mitsubishi L200 have seats behind the driver and windows and doors for passengers, so surely using the logic from the Coca Cola case, those vehicles would be cars too?
Thankfully not. For such vehicles, the income tax definition follows that for VAT, so if its payload is one tonne or more, it is a van. Also, the weight of any hard tops added onto the cargo area is disregarded for that calculation. This rule only applies to double-cab pickups, though.
Practical tip
Owners of VW Kombis and Vauxhall Vivaros should look to either replace those ‘cars’ for vans with no windows/additional row of seats or a double-cab pickup, and/or re-designate them as ‘pool vans’ so all employees can use them purely for business purposes. There is no word that the Kombis or Vivaros will be treated as cars for VAT or capital allowance purposes, but now that HMRC has ‘tasted blood’ in the second highest court of the land, there’s always a chance.
