There have been several important tax decisions previously regarding the difference between vans and cars, but how do the different rules regarding electric vans affect their tax treatment?
Let’s use a hypothetical:
A Ltd has acquired a new electric company van that its director, Bob, uses to go to and from work, as well as during the regular workday.
However, Bob also has the van in the evening and at the weekend for his private use. For Benefit in Kind (BiK) purposes, the company classes the vehicle as an electric van.
Unlike company cars, the BiK charge for an electric van is nil. Therefore, employees with electric company vans can, where permitted to do so by their employer, use their company van for unrestricted private use without any associated tax charge.
Unfortunately, HMRC disagrees with this judgement and argues that the van, is in fact, an electric car and not a “goods vehicle”, as defined by Section 115 ITEPA (Income Tax (Earnings and Pension) Act) 2003.
(1) In this Chapter— “car” means a mechanically propelled road vehicle which is not:
(a) a goods vehicle,
(b) a motorcycle,
(c) an invalid carriage, or
(d) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;
“van” means a mechanically propelled road vehicle which:
(a) is a goods vehicle, and
(b) has a design weight not exceeding 3,500 kilograms, and which is not a motorcycle.
(2) For the purposes of subsection (1)…
“goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description;
In reaching such a decision, HMRC would need to prove that the van in question had multiple purposes, beyond just the transport of goods.
Many modern vans have been designed and are advertised as multipurpose vehicles, and there are a number on the market that have crew cabs or “kombi” roles, that allow for passengers as well as goods.
This confusing situation has been tested many times, not least in the case of Payne, C Garbett, Coca-Cola European Partners GB Ltd v HMRC at the Court of Appeal on 20 July 2020.
In this case, HMRC was able to prove that the VW Transporter T5 Kombi and Vauxhall Vivaro vehicles provided by Coca-Cola to employees were not vans, and instead served the purpose of being a car.
Examples and cases such as this can make it difficult for companies to find the most tax-efficient fleet of vehicles and can make the choice of vans and cars more complicated.
If you are looking to purchase new vehicles for your business, it is important to seek expert advice. Contact us to find out more.
“Richard Anthony case study – Terry Lewis – Jaques Samuel Pianos Widely considered to be London’s leading piano retailer, Jaques Samuel Pianos has grown considerably from its humble beginnings in the front room of Mr Samuel’s home in Notting Hill. They are now internationally recognised and have provided pianos for high-profile clients like Queen and […]”
Terry Lewis – Jaques Samuel Pianos
“Richard Anthony: ‘a super-star firm’ MT Finance is a property finance lender, specialising in bridging loans and auction finance. They assist numerous property professionals, business owners, and individuals with their finance requirements and specialise in short-term asset-based lending. Founder and Director, Tomer Aboody, knew that as an asset-based lender, the business would require an expert […]”
Tomer Aboody – MT Finance
“A family fairground success story The Botton family have been running a traditional fairground, arcade and amusement park in the heart of Skegness since taking over the Pleasure Beach in 1965. Jim, the Director of the company, took over from his father and now heads day-to-day activities and administration. He said: “The Pleasure Beach is […]”
Jim Botton – Pleasure Beach (Skegness)