OCL Accountancy: When is a van a car?

The Court of Appeal has finally ruled on the tax status of certain vehicles and the result can significantly change the tax liability of the drivers.

In the Coca Cola case the Court upheld HMRC’s opinion that vans with windows and a second row of seats behind the driver are not goods vehicles but cars for tax / benefit purposes. Going forward if the ruling is unchallenged by Coca Cola it could set a legal precedent which may result in drivers paying higher tax and national insurance than they would if the vehicles had been classed as ‘goods vehicles’.

The legislation defines a goods vehicle as one of a construction primarily suited for the conveyance of goods. The tax tribunal determined that modified VW Kombi vans failed this text and it has subsequently been decided that the Vauxhall Vivaro should also be taxed as a car for P11d benefit in kind purposes.

The result is that where the vehicle is available for private use, the driver will have a taxable benefit based on the original list price multiplied by a percentage based on the vehicle’s CO2 emissions. Employers may need to reconsider providing such vehicles going forward, together with reviewing their P11d reporting.

To make matters more confusing, the benefit in kind rules are not the same as the rules for the recovery of input VAT on vehicles and we would all benefit from a common definition for tax purposes.