However, following a recent case won by HMRC, the landscape of company-provided commercial vehicles is changing.
A recap of benefits in kind on vehicles:
All vehicles provided to employees are taxed as benefits in kind.
The value of the benefit in kind for a car is calculated as being the list price of that vehicle multiplied by a percentage relevant to that particular car based upon it's CO2 emissions level. The higher the emissions, the higher the benefit.
This makes many cars unattractive to operate as company vehicles (although should be considered for electric cars).
Vans and commercial vehicles made available for private use are however not taxed on this basis. Instead they are taxed on a flat benefit in kind amount of £3,490. This means that for a lower rate (20%) tax payer the annual tax cost is just £698, and £1,396 for a higher rate (40%) tax payer.
This tax structure for such vehicles has led to a rise in the use of commercial vehicles when an employer is providing vehicles for it's directors and team. Particularly popular are vans that are then modified to have a second row of seats and windows behind the front seats in order to make them more suitable to family use
What has changed?
In a recent court case HMRC have been successful in their assertion that some commercial vehicles have the characteristics of a car and should be taxed as such. In most cases this will have a significant impact upon the tax due on the provision of the vehicle.
To be classified as a van for tax purposes a vehicle must be “a vehicle of a construction primarily suited for the conveyance of goods or burden”. The HMRC challenge has certainly added uncertainty in this area.
Which vehicles are included?
The case successfully won by HMRC involved a VW Transporter Kombi, and a Vauxhall Vivaro. Ordinarily both these vehicles would meet the definition of a van. However, in this case, both vehicles had been adapted. A second row of seats had been added, and windows to the side of those seats. Case law now dictates that such adapted vehicles should be treated as cars for benefit in kind purposes.
How does it work?
I drive a company provided commercial vehicle. Should I be concerned?
If this is a van, and remains un-adapted, with just one row of seats, then the treatment of the vehicle as a van remains valid.
Similarly, there are also no current concerns over the status of the “double cab pick up” style vehicles such as the Nissan Navara, providing they meet the long required criteria of being able to carry a one tonne payload on the back, in addition to a canopy over the load area.
For now therefore there should be no concern if you drive a company provided commercial vehicle that has not been adapted, that is available for your private use. We will however keep an eye out for any developments in this area.
What if I have use of an adapted van?
If you think you may be impacted by this new ruling then please get in touch. We will discuss the vehicle and the adaptations made to it, and from there make recommendations on next steps.