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Car or Van

Mark Lee from the Tax Advice Network explains to us the definition of a commercial vehicle for income tax purposes. 

When an employee is provided with a vehicle to use for business and private journeys, the taxable benefit will vary enormously where the vehicle is classified as a goods vehicle (a van) as opposed to non-goods vehicle – i.e. a car.

In 2011/12 and 2016/17 Coca-Cola provided its employees with the following vehicles and fuel:

  • VW Transporter T5 Kombi van- second generation (Kombi 2);
  • VW Kombi Transporter T5 - first generation (Kombi 1);
  • Vauxhall Vivaro.

The company asserted that these vehicles were commercial vehicles, and thus the taxable benefit for 2016/17 would be £3,170 for each driver. Fuel was also provided for private journeys, which if those trips consisted of more than normal commuting, the additional taxable benefit would be £598 per year.

If the vehicles were categorised as cars, the driver would be taxed on a percentage of its list price (say £20,000), depending on the vehicle 's CO2 emissions (say 153g/km). Where the vehicle had a diesel engine the taxable benefit would be: 30% x 20,000 = £6,000. The fuel benefit would be 30% x £22,200 = £6,660.

ITEPA 2005, s 115 defines a van as: a goods vehicle with a design weight not exceeding 3,500kg. The vehicles, in this case, were designed to carry a payload of 1000kg, but they also had a second row of seats for passengers.

There was a large amount of expert evidence given in the FTT case as to whether the vehicles were primarily designed to carry goods or passengers. The judge decided that the Vivaro was a goods vehicle for the purposes of ITEPA 2005, s 115(2), but the VW Kombi vans were not primarily designed to carry goods, so were technically cars.

This case shows that just because a vehicle looks like a van, it is not necessarily a van for income tax purposes. As the tax differential is so large, it's worth checking the specifications of the vehicle in some detail.

Payne, Garbett and Coca-Cola European Partners GB Ltd v HMRC            

 

Mark Lee – Tax Advice Network