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New tax guidance has been announced that will categorise double cab pick-ups as company cars rather than vans from 1 July this year. The reclassification of double cab pick-ups will have potential tax liabilities regarding vehicle classification for benefit-in-kind (BIK) tax purposes. This change solely affects company car usage and has no impact on private purchases or genuine pool vehicles provided by companies.
Previously, double cabs were taxed in line with VAT rates which rate them according to their payload. Double cabs were seen as commercial vehicles if their payload was one tonne or more, and a private car if below this.
This change has occurred after the recent legal dispute between Coca-Cola and HMRC regarding the classification of dual-use vehicles. The court decided that vehicles should be clearly categorised according to their primary function, either for the transportation of goods or passengers. In instances where the primary function is not clear, the vehicle will be classed as a car for taxation purposes.
However, HMRC has put in place transitional arrangements so both employers and employees do not incur higher taxes for vehicles already on fleet and on order. HMRC will only change the rules from 1 July 2024 so if you want to take advantage of the old concession you need to order the vehicle before 1 July.
HMRC has given the following examples which all relate to double cab pick-ups made available to employees, that are not of a construction primarily suited for the conveyance goods or burden.
Example 1 – Employer A purchased a double cab pick-up on September 14, 2024. As purchases on or after 1 July 2024 would be subject to the new rules, in this example the vehicle would be classified as a car and a car benefit charge would arise.
Example 2 – Employer B leased a double cab pick-up on April 10, 2024. As this was leased before July 1, 2024, the previous rules continue to apply for Employer B until the earlier of the lease expiry, or April 5, 2028.
Example 3 – Employer C purchased a double cab pick-up on July 10, 2023. This was subsequently traded in on November 1, 2024, for another double cab pick-up.
The previous rules apply to the first vehicle for Employer C until the trade in point on November 1, 2024. As the new double cab pick-up was purchased after July 1, 2024 it will represent a car under the new rules and a car benefit charge would arise.
Example 4 – Employer D placed an order for a double cab pick-up on January 5, 2024, but this was not available to the employer until September 2, 2024.
As the agreement was entered into before July 1, 2024, the previous rules continue to apply for Employer D until the earlier of disposal, lease expiry, or April 5, 2028.
Therefore, if you are considering a double-cab and worried about the impending rule changes, the advice would be to act now. Double-cab pickups ordered or leased before 1st July 2024 retain their advantageous van classification for tax purposes until 5th April 2028.
