Most people can simply look at a vehicle and determine it to be a van or car without difficulty. However, HMRC has taken a policy decision to challenge the view of employers on some vehicles; the reason being that the taxable benefit arising on cars is significantly higher than on vans.
The legislation states that a van must be a goods vehicle, defined as a vehicle of a construction primarily suited for the conveyance of goods or burden.
HMRC guidance argues:
- the test is applied at construction;
- a vehicle designed and marketed as a multipurpose vehicle is unlikely to be a van;
- a vehicle with side windows behind the driver and passenger doors, is unlikely to be a van, particularly if fitted, or capable of being fitted, with additional seating behind the driver’s row irrespective of whether fitted in the vehicle at the time.
HMRC accepts that a double cab pickup with a payload of one tonne or more, excluding its hard top, is a van for benefit purposes. However, HMRC has challenged other types of vehicles with a second row of seats, arguing that they are cars, despite being classified by DVLA and insurance companies as designed and constructed for the carriage of goods.
This DLVA classification restricts their drivers to 60 mph in a 70 mph zone. It therefore seems inappropriate for one government department to issue speeding fines as though they are vans and another government department to impose income tax penalties as though they are cars.
Two Volkswagen Kombi models and the Vauxhall Vivaro vans were the subject of this recent Tribunal. The Kombis were found to be cars and the Vivaro a van, yet most people would struggle to see the difference.
Whilst the decision was found in favour of HMRC regarding the VW Kombis, the case detailed salient factors which contradict those set out in HMRC’s guidance.
It was found necessary to look at all the characteristics of the entire vehicle as provided to the employee, not just at construction. The side windows were considered irrelevant and being multi-purpose per se does not rule out the van being constructed primarily for the purpose of carrying goods. In the case of the Vivaro classified as a van, the over-riding factor seemed to be the significant cargo space available in the middle section, even with the middle seats in place, compared with the VW Kombi.
Employers should be mindful when relying on HMRC guidance in determining the taxable benefit arising on a company vehicle, as this may result in unexpected tax bills and possible penalties. The wider consequence of this case could be that double cab pickups are brought under review.
Whereas the recent case provides some useful principles, the picture remains unclear. We would welcome, as a matter of urgency, new guidance as to what HMRC deems to be a car and what is a van. In the meantime, with HMRC guidance contradicting the Tribunal findings, the retrospective collection of tax on these vehicles seems wholly unreasonable.