The tax consequences of providing employees with company vans which are available for private use, rather than cars, can be beneficial. As a consequence, some employees are provided with “double cab pickups” which have historically been treated as vans for tax purposes.
HMRC has recently issued a change to their policy on the tax treatment of “double cab pickups” which will bring them into a higher benefit in kind based on company cars.
A double cab pickup 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); and
- an uncovered pickup area behind the passenger cab.
Historically, HMRC has accepted for both VAT and income tax benefit in kind purposes that a double cab pickup should usually fall under the scope of a van for tax purposes, unless major modifications are made to them which significantly alters the look and capabilities of the vehicle.
What has changed?
The new guidance from HMRC is that, following the decision of a tax case from 2020 (the “Coca-Cola case”) which involved the definition of several “Combi” vehicles, the historic approach will no longer apply. From 1 July 2024, HMRC has said that, because of their primary construction being suitable for both transportation of goods and passengers equally, and there is no “predominant suitability for the carriage of goods”, most double cab pickups will be classed as cars for the purposes of income tax benefits in kind.
Why has HMRC changed their interpretation?
This change of guidance has been made following HMRC’s consideration of the Coca-Cola tax case in 2020. The case concerned three vehicles which had been treated for tax purposes by the company as vans. For one specific vehicle, it was clear that it had similar amounts of space for passenger seating as well as for transporting goods – the vehicle in question had two rows of seats and a covered space in the rear for the transporting of supplies. The case was taken to the Court of Appeal who concluded that the vans were not ‘goods vehicles’ (a vehicle that is constructed to primarily suit the conveyance of goods or burden). Therefore, it was ruled that the vehicles should be considered to be cars for benefit in kind purposes.
What are the tax implications for employees who are currently provided with double cab pickups?
Under transitional arrangements employees who have purchased, leased or ordered a double cab pickup before 1 July 2024 will be able to rely on the previous treatment until the earlier of the disposal, lease expiry or 5 April 2028.
What are the future tax implications for the provision of double cab pickups?
With almost all double cab pickups being classified as company cars and attracting a taxable car benefit from 1 July 2024, employees will most likely face a greater tax bill as a result. The table below illustrates the tax liability which would apply to those higher rate employees who are provided with a new, fully expensed, double cab pickup (using a vehicle with a list price of £60,000 and Co2 emissions of 196 g/km) after 1 July 2024:
| Car benefit | £8,880 | Van benefit | £1,584 | £7,296 increase |
| Fuel benefit | £4,114 | Van fuel benefit | £303 | £3,811 increase |
In addition, the employer would be liable to pay Class 1A National Insurance Contributions, which would increase by £3,832 for the year.
As a consequence of the change there could also be implications for a fuel benefit, particularly where the exemption for home to work travel which only applies to vans has previously applied and doesn’t apply to cars.
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
