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Multi-purpose vehicles with crew-cabs are cars

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The Court of Appeal has ruled that three types of modified crew-cab vehicles are cars rather than vans for tax benefit purposes.

This is the latest episode in a long running saga over the difference between cars and vans, which has now been resolved, with potentially significant, and expensive, consequences for both employers and employees.

The question of car versus van is always asked, and the Courts have now ruled on three types of modified vehicle, each based on a panel van design but with a second row of seats behind the driver – a so called ‘crew-cab’ vehicle. The vehicles in question were a first or second generation VW Transporter T5 Kombi and a Vauxhall Vivaro.

The employer argued that all the vehicles were vans, HMRC said they were all cars.

The Court of Appeal decided that the difference between the two vehicles was not sufficient to differentiate them and, since both were multi-purpose and equally capable of carrying goods or people, neither was primarily suited to the carrying of goods, none of them are ‘van-like’ enough. As a result, both vehicles failed to qualify as vans for benefit in kind purposes.

The result is binding; thus employers must take the decision into account when preparing P11D computations for 2020/21 onwards.

This also means that a review of company vehicles is needed to confirm the correct treatment for any similar crew-cab vehicles made available to employees.

It is important that staff involved in purchasing future company vehicles are aware of the decision and the tax implications of providing similar crew-cab vehicles where private use is permitted.

Regarding earlier years, we have to look to prevailing practise at the time the earlier years P11Ds were prepared.

For the most recent 2018/19 and 2019/20 tax years, current HMRC guidance is clear and it should have been known that this case was before the courts and have taken this into account when preparing returns for these years.

For 2017/18 and earlier returns, there is an argument that this single case was not enough to justify a change of position at that point.

It should be noted that the Courts decision is very much in line with HMRC’s guidance. This has said for some time that, for a vehicle to be a van, it must be primarily suited for carrying goods and that vehicles which have side windows behind the driver and which can be fitted with additional seating are unlikely to meet the definition of a van.

Accordingly, where a vehicle has not been reported in line with both that guidance and the above final decision, there is potentially the risk of HMRC enquiry.

If this applies to you, you should contact us for specialist advice on the next steps.