Goods vehicle or company car? Why it matters to your tax bill.
22nd May 2019
The tax implications on company vehicles can be complex as HMRC have various ifs and buts, meaning things aren’t always as straightforward as they may initially seem as evidenced by a recent tax case.
Crew cab vehicles, a type of vehicle that is ideal for transporting both goods and people, are becoming increasingly popular for small businesses. However, although the vehicles may look like a van or be described as a van, HMRC has begged to differ, for tax purposes at least.
In a recent tax case involving Coca-Cola, HMRC disputed that certain vehicles – in this case, the Vauxhall Vivaro and VW Transporter T5 Kombi 1 and 2 – did not meet the definition of a van for benefit in kind purposes. HMRC argued that they were not primarily used as ‘goods vehicles’, thus making them cars by default. Whilst Coca-Cola appealed the decision against both, and the Vivaro was ultimately classified as a goods vehicle, the tribunal decided that the Kombi 1 and Kombi 2 had no overall ‘primary suitability’ therefore they were deemed to be cars.
The distinction seems to be based on whether the vehicles were purchased primarily for the transport of goods or people, with the former being classed as a van and the latter as a car. The liability to corporation tax, through the loss of the Annual Investment Allowance, and Class 1A National Insurance Contribution (NIC) can vastly increase if a vehicle is categorised as a car, meaning costly implications for the employer. In addition, employees face much more expensive company car benefit in kind rates - not forgetting there is no exception for incidental private use for cars as there is for vans. There are also significant penalties for making an incorrect return on a P11D of up to £3,000 per form.
If you are unsure about the classification of a company vehicle, we suggest that you contact us as soon as possible so we can evaluate your individual situation, work to determine the correct tax status of your vehicle and avoid or minimise any penalties from HMRC. Call us on 01926 422292 for further help and guidance.