A Car or a Van – Is There Any Tax Difference?

When company cars and vans are used privately by employees, they are treated differently, when it comes to tax charges. Generally, vans are treated more dearly than cars, that are privately used, though the reduced rates for low emission cars make the matter complicated. For example, a zero-emission car would have 0% benefit, while an electric van continues to have a flat-rate benefit; albeit 80% of the standard flat-rate benefit.

Since long there has been a confusion in the company car vs company van debate. Company vans are sometimes referred to as “crew-cabs” vehicle. These vans have a second row of seats just behind the driver’s seat. Till recently, a vehicle can be considered ‘van-like’ if the 2nd row of seats did not stretch to the entire width of the vehicle, which is enough to be taxed as a van for ‘benefit in kind’ (BIK) purposes.

In the Coca Cola case (following the long-running Tax Tribunal case, HMRC v Coca-Cola (GB) Ltd.), The Court of Appeal (CA) had concluded that multi-purpose vehicles, fit to carry goods and people, are not “van-like” and the tax charges on them will be of private cars.

Then What is a Van?

The legislation says a van is a goods vehicle, that is a vehicle of a construction primarily suitable for the transportation of goods or freight.

Looking at the definition, CA determined that

• “a construction” should be understood as the condition of the vehicle after modifications and the state in which it is handed over to the employee
• “primarily suited” refers to “first and foremost”, clearly more appropriate for goods transport and not just more suitable on a fine margin

If you are providing ‘crew cab’ type company vehicles to your employees and you permit them to use it as a private car, you will have to ensure you take this call into account when preparing P11D computations for the financial year 2020/21 and ahead.

If you are confused and not sure what exactly is this, you can reach out to us for detailed discussion without hesitation.

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