HMRC – confusing the tax lines between cars and vans

Following a recent tax tribunal between Coca Cola and HMRC, the issue of whether a vehicle is a car or a van for tax purposes can be difficult to understand. Nicola Roby, Director explains.

What’s the advice from HMRC?

HMRC define a car as a vehicle with three or more wheels constructed or adapted for the carriage of passengers (not payloads) and which has, behind the driver’s seat, “roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows”.

According to HMRC, a vehicle is not a car if it has been built to carry payloads rather than people. When constructed, the vehicle has a large space clearly designed to store goods in transit and that space has no windows. Also, the storage space for the goods cannot be a considered a car boot if it weighs more than three tonnes unladen, and its maximum gross weight is a tonne or more.

In these situations, the vehicles would be considered as goods vehicles, or vans.

Are you falling foul?

There are van-derived and combi vans and HMRC have published a list of manufacturer models with their settled judgements on what constitutes a cars or vans.

Any modifications you make to a van-derived car, car-derived van, or combi van will affect HMRC’s judgement on the status of a vehicle. For example, if you fit a load bay cover and its weight reduces the original design’s payload under one tonne, it is likely to be reclassified as a car.

Why does it matter?

If your business purchases a car, it cannot recover VAT on that car. If you buy a van, the VAT can be reclaimed.

The purchase of a van attracts a flat-rate benefit in kind tax treatment whilst a car’s benefit-in-kind treatment is determined by the list price of the car and its CO2 emissions.

The rules for cars and vans differ for VAT on private fuel use and when it comes to the point of resale. Van drivers also receive more generous financial treatment on the fuel benefit charge for any private mileage too.

Coca Cola v HMRC

Coca Cola and two of its employees recently took HMRC to the VAT Tribunal when HMRC declared that the employees’ Volkswagen Transporter Kombi and Vauxhall Vivaros were cars and not vans.

The Kombis and the Vivaros were bought by Coca Cola in order to transport vending machines to and from their designated locations and they had modifications including floor coverings and bulkheads.

The Court decided that whether a vehicle is a car or a van is down to an assessment on whether each vehicle had a “dual capability of carrying passengers and carrying cargo”.

In terms of the Vivaro, the judge concluded that the construction of the Vivaro was primarily suited to the conveyance of goods. For the Kombis, the judge decided that the vehicles were not constructed primarily to be exclusively for the use of goods conveyance which is confusing.

Confused? We are

We’re confused about the mixed messages we are receiving and are awaiting clearer guidance from HMRC on this issue.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

    Follow us

    Tweets by @CHW-accounting

    CHW-Accounting
    @chw-accounting


    Twitter: chw_accounting

    WHAT'S THE NEWS?

    Grab a biscuit and a brew and read our latest news.

    8 March 2022

    Temporary reduced VAT rate for leisure and hospitality to...

    by

    On 8 July 2020, as an urgent response to the pandemic, the government announced a number of VAT measures including a temporary reduction of the VAT…


    Read more >

    1 March 2022

    National Minimum and National Living Wage changes April 2022

    by

    From 1 April 2022, the government is increasing but the National Minimum and National Living Wage rates. The National Minimum Wage is the minimum amount an…


    Read more >

    22 February 2022

    Dividend taxes to rise from 6 April 2022 –...

    by

    The government has confirmed that it will not be backing down on the planned hike in National Insurance (NI) and dividend tax from April 2022. There…


    Read more >

    10 January 2022

    Late filing and late payment penalties are to be...

    by

    HMRC has given self-assessment taxpayers more time to ease COVID-19 pressures. With the self-assessment deadline less than three weeks away, many individuals and agents will be…


    Read more >

    7 January 2022

    Making tax digital for VAT – April 2022 –...

    by

    Since 1 April 2019, VAT-registered businesses with a turnover above the VAT registration threshold of £85,000 have been required to keep their records digitally and provide…


    Read more >

    YOUR CHALLENGES

    No matter what your challenge is, we’ve probably dealt with it before.



    Need an Accountant?

    Get in touch >


    Need an Accountant?

    Get in touch >


    Tax issues?

    Find out more >


    Tax issues?

    Find out more >


    Trying to grow your business?

    We can help >


    Trying to grow your business?

    We can help >


    Managing cashflow?

    We can help >


    Managing cashflow?

    We can help >


    Starting a business?

    We can help >


    Starting a business?

    We can help >


    Looking for funding?

    Need help with funding? >


    Looking for funding?

    Need help with funding? >


    Buying or selling a business?

    We can help >


    Buying or selling a business?

    We can help >


    Adopt the cloud?

    We can help >


    Adopt the cloud?

    We can help >


    What else can we do for you?

    We can help >


    What else can we do for you?

    We can help >
    CONTACT US

    Get in touch, no hard sell, just a brew, a biscuit and a chat.