Tax Changes to Double Cab Vehicles

For over two decades double cab pickup trucks have been classified as vans for company car tax purposes, but this is set to end this summer.

HMRC has updated guidance setting out the new benefit in kind tax treatment coming into force from 1 July this year which will see a five-fold increase in benefit in kind tax bills.

This will hike rates for employers using double cab vehicles on company fleets as they are brought in line with the company car tax regime, although there will be a transition period.

This follows the Coca-Cola Court of Appeal ruling on van classification.

‘As an example, the change could see the benefit in kind rising from something in the order of £4,500 per annum for a “van”, with associated fuel, to over £25,000 as a “car”. Employers will face an NIC charge on the corresponding increase at 13.8% too.

‘It is also unhelpful that these vehicles will continue to be commercial vehicles for VAT purposes, but cars for income tax and benefit in kind purposes, adding to an already complicated UK tax landscape.’

Pickup trucks are widely used in the farming and construction sectors because of the practicality of their off-road ability and load-carrying ability. If the payload of the vehicle is over one tonne, it is classified as a van.

Many will be disappointed by this change as it has been HMRC’s approach since 2002, although single-cab pickups will still be classified as vans, as long as the weight threshold is met.

HMRC has long argued that double cab pickups, such as Vauxhall Vivaros and VW Transporter T5s, are often used as passenger cars, which is the reason for the change.

The defining case was Payne & Ors [2020], brought by Coca-Cola, which disputed HMRC’s position that modified vans should be treated as cars for VAT purposes. The Court of Appeal ruled in favour of HMRC.

The latest HMRC guidance states: ‘From 1 July 2024 most, if not all, double cab pickups will be classified as cars when calculating the benefit [in kind] charge. This is because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.’

There will be transitional arrangements for employers who have purchased, leased, or ordered a double cab pickup before 1 July 2024. They will be able to use the previous treatment until the earlier of disposal, lease expiry, or 5 April 2028. The position prior to 1 July 2024 remains unchanged as outlined at EIM23150.

In future, the tax paid on double cabs will be based on vehicle emissions, but with electric pickups set to start being sold in the future, this will throw another spanner in the works for HMRC.

The Society of Motor Manufacturers and Traders (SMMT) reported that pickup registrations were up 22% in the first six months of 2023, equivalent to 18,353 more trucks being bought than the same time in 2022.

HMRC said that industry stakeholders had been aware of these changes since spring 2023, giving them plenty of time to react to the changes.

An HMRC spokesperson said: ‘We’re changing the tax treatment of double cab pickups (DCPUs) when used as a benefit in kind and when claiming capital allowances, following a Court of Appeal ruling.

‘We’ve put in place transitional measures to help taxpayers adjust to the new rules.’

‘It is also unhelpful that these vehicles will continue to be commercial vehicles for VAT purposes, but cars for income tax and benefit in kind purposes, adding to an already complicated UK tax landscape.