His Majesty’s Revenue and Customs (HMRC) have this week revealed plans to close a tax loophole that allows Pick Ups with a payload of greater than one ton to be taxed as a commercial vehicle, not a car. The move was announced on 12th February by HMRC in tax note EIM23151.
For around two decades, private individuals have been able to run pick-ups as company cars and pay significantly less benefit-in-kind (BIK) than if they were a regular saloon, hatchback, or SUV.
Pick-ups have been classified in the grey area between passenger cars and vans for some time. Popular with farmers and the self-employed they have proved a hardy workhorse, and the UK taxman has historically judged those trucks with a payload in excess of one ton as being closer to commercial vehicles than private cars.
However, in recent years the double cab variants have become plusher with leather seats and the comforts normally attributed to cars. HMRC argues that these are now used more often as private cars than working trucks – and is closing the tax loophole for company car drivers.
HMRC have, therefore signalled its intention to remove the tax break on all new pick-ups ‘purchased, leased or ordered’ on or after 1 July 2024.
From 1 July 2024, HMRC will no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes. This VAT approach for double-cab pick-ups differentiated based on payload, with anything under one ton classified as a car, and anything a ton and over as a van. This rule was replicated as a pragmatic way of resolving the primary suitability and classification of double cab pick-ups.’
How to buy a pick-up truck and pay less tax
Our advice if you’re worried about the impending rule changes is to buy a double-cab before the 1 July 2024 deadline. So long as the purchase or lease is made before that date, you will be able to pay benefit-in-kind tax at the lower rate until 5 April 2028. Alternatively, stick with a single-cab pick-up which is considered ‘of a construction primarily suited for the conveyance of goods or burden.’
The point of law at play is a hearing at the Court of Appeal in Payne & Ors (Coca-Cola) v R & C Commrs (2020). The court found that the use of crew vans meant that supposed commercial vehicles were in fact suitable as private cars too, providing a benefit-in-kind to company car drivers who could use them for family and leisure purposes as much as work. ‘As a consequence [crew vans and their ilk] failed to qualify as goods vehicles and were classified as “cars” for benefit-in-kind purposes,’ the HMRC notes.
Further Reading
EIM23151 - Car benefit: double cab pickups 1 July 2024 onwards - HMRC internal manual - GOV.UK (www.gov.uk)
