A multi-purpose vehicle with crew cab is a car
The Court of Appeal (CA) has officially ruled that ‘vans’ classed as multi-purpose vehicles where a crew cab has been added, should be considered as cars for benefit in kind (BIK) tax purposes. This ruling has come as a result of the Payne, Garbett and Coca-Cola European Partners Great Britain v HMRC case which was taken to the CA following an earlier tribunal. However, this may not be the final position if Coca-Cola wish to appeal the decision.
Coca-Cola have supplied employees with modified vehicles that include an extra row of seats behind the driver, or ‘crew-cab’, to allow employees to use them for personal use. However, Coca-Cola classed the vehicles as vans for BIK tax purposes, but HMRC disagreed and said they should be classed as cars.
What is a Van?
The definition of a van in the legislation states that the vehicle must be a ‘goods vehicle’, which in turn is defined as “a vehicle of a construction primarily suited for the conveyance of goods or burden”. If a vehicle does not meet this definition then it will be considered a car.
Until this ruling this definition was interpreted to treat vehicles as vans where there was only a slight emphasis on goods over other use, whereas the Court has now changed this view to require clear predominance of the design in favour of the carriage of goods, meaning many border-line cases will now be considered to be cars for this purpose.
The CA ruling now will have an impact on all businesses who provide multi-purpose vehicles to employees as benefits in kind, meaning they will need to consider the ruling when preparing P11D’s for 2020/21 onwards. It is possible that a further review of company vehicles is needed to ensure the correct treatment has been applied to earlier years.
Employers will also need to make staff involved in the purchase of company vehicles aware of the tax implications.
HMRC have existing guidance which is in accordance with the CA ruling, and subject to a successful appeal by Coca-Cola, businesses should be aware that where a vehicle has not been reported in line with said guidance, there is a potential for an HMRC enquiry.
For further information on benefits in kind, please contact you usual tax contact at HWB on 023 8046 1200.