What is the background?
Providing employees with company vans which are available for private use, rather than cars, can be beneficial from an employment tax viewpoint. As a result, some employees are provided with DCPUs, which have historically been treated as vans for tax purposes.
A DCPU is a vehicle which has:
- a front passenger cab that contains a second row of seats and is capable of seating about four passengers, plus the driver;
- four doors capable of being opened independently, whether the rear doors are hinged at the front or the rear (two door versions are normally accepted to be vans);
- a payload of one tonne or more; and
- an uncovered pickup area behind the passenger cab.
HMRC guidance has historically confirmed their view that DCPUs were vans for benefit in kind purposes.
However, that was not consistent with the decision of a tax case in 2020 (the “Coca-Cola case”) which involved the definition, for benefit in kind purposes, of several “Combi” vehicles. For something to be regarded as a van for benefit in kind purposes, its primary construction, at the date it is made available to the employee, must be for the transportation of goods. Vehicles that were held to be suitable for both transportation of goods and passengers equally were held to be cars, not vans.
What is the issue?
HMRC’s guidance has been changed for benefit in kind purposes. From 6 April 2025, the classification of a DCPU needs to be determined in the same way as any other van, by considering the reason of its primary construction. As a result, from 6 April 2025 most DCPUs will be treated as cars for benefit in kind purposes, due to its dual purpose.
However, transitional arrangements will apply in relation to DCPUs purchased, leased, or ordered before 6 April 2025. In those cases, employers will be able to rely on HMRC’s previous guidance and the vehicles will be regarded as vans for benefit in kind purposes until the earlier of:
- The disposal of the vehicle;
- The lease expiry; or
- 5 April 2029.
What do employers need to consider?
With almost all new DCPUs being classified as company cars and attracting a taxable car benefit from 6 April 2025, employees who change vehicles after then will most likely face a higher tax bill as a result.
The illustrations below highlight the estimated additional annual tax and Class 1A National Insurance (“NI”) liability from 6 April 2025, for a higher rate employee who is provided with a new, fully expensed, petrol DCPU with a list price of £60,000 and Co2 emissions of 196 g/km.
- Employee uses the DCPU for private use, including ordinary commuting
| Car benefit | £8,880 | Van benefit | £1,584 | £7,296 increase |
| Fuel benefit | £4,114 | Van fuel benefit | £303 | £3,811 increase |
Additional Class 1A NI – £4,165
- Employee uses the DCPU for ordinary commuting and business only
| Car benefit | £8,880 | Van benefit | £0 | £8,880 increase |
| Fuel benefit | £4,114 | Van fuel benefit | £0 | £4,114 increase |
Additional Class 1A NI – £4,873
How can UNW help?
UNW’s employment taxes team has significant experience in providing support to clients, irrespective of their size. Our support will be provided to meet the specific requirements of an organisation and can include:
- Analysis of the tax and NIC implications of the new guidance on the employer’s fleet and advising on any areas of concern;
- Considering the options available to the employer; and
- Providing support with any proposed changes, including any compliance issues.
If you would like to discuss how we can help you, or have any other employment taxes related queries, please get in touch with us at employmenttaxesteam@unw.co.uk
