We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
With changes coming in April 2025, distinctions between company vans and cars are significant for tax implications
6 April 2025 onwards
A ‘double-cab pick-up’ is broadly a truck with two rows of enclosed seating at the front for up to five people and an uncovered load area behind the passenger cab. The current tax treatment of double cab pickups that applies to vehicles from 6 April 2002 to 5 April 2025 is explained at EIM23150.
From 6 April 2025, HMRC will no longer align its interpretation of the terms ‘car’ and ‘van’ for tax purposes with the definitions used for VAT purposes. HMRC has updated its Employment Income Manual at EIM23151.
From 6 April 2025, classification of double cab pickups will therefore need to be determined by assessing the vehicle as a whole at the point that it is made available to determine whether the vehicle construction has a primary suitability as per the two-part test outlined at EIM23115 onwards. It therefore follows that from 6 April 2025 most double cab pickups are expected to be classified as cars when calculating the benefit charge. Consequently, from 6 April 2025, most double cab pick-ups are likely to be classified as cars for benefit charge calculations due to their dual suitability for passenger and goods transportation.
Why is the matter important?
Distinctions between company vans and cars are significant for tax implications. While negligible private use of a company van does not trigger a taxable benefit, any private use of a company car, however minimal, results in a taxable benefit.
Generally, benefits from company vans attract lower income tax and national insurance contributions (NIC) compared to company cars, except in cases of ultra-low or zero-emission vehicles.
Misclassifying vehicles as company vans instead of cars can be financially detrimental for employers. It can lead to underpaid taxes, including NIC liabilities, penalties and interest charges imposed by HMRC.
The Income Tax (Earnings and Pensions) Act 2003 (ITEPA) s.115 (1) defines a van as a mechanically propelled road vehicle designed primarily for goods transportation, with a design weight not exceeding 3,500 kilograms. Notably, motorcycles are excluded from this definition. Human beings are not ‘goods or burden of any description’ so a vehicle designed to carry people (such as a minibus) will not be a van for these purposes.
A notable legal case involving The Court of Appeal in Payne & Ors (Coca Cola) v R & C Commrs [2020] BTC19 considered whether three types of vehicle provided to employees by their employer were goods vehicles for the purposes of determining the cash equivalent of the benefit in kind. In doing so, the courts focused on the meaning of ‘construction’ and ‘primary suitability’ in the context of s115 the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).
The Court of Appeal found that all three vehicles were multi-purpose vehicles and as such were not ‘primarily’ suited to a particular use. To qualify as goods vehicles, the vehicle must be ‘primarily suited to conveyance of goods or burden of any description’. As this was not the case, the vehicles could not be vans, so must be classified as cars. HMRC commentary on the decision can be found in the Employment Income Manual at EIM23121.
HMRC highlights the decision, confirming its longstanding view that the ‘construction’ of a vehicle is that of the final product when made available to the employee, not the original construction. It also reiterated the decision of the court that a vehicle can only be classed as a van if it is predominantly suitable for the conveyance of goods or burden. In light of the decision, HMRC will be checking P11D returns to ensure that vehicles have been classified correctly for tax purposes.
Transitional arrangements
Transitional arrangements will apply for employers that have purchased, leased, or ordered a double cab pickup before 6 April 2025, whereby they will be able to rely upon the previous treatment until the earlier of disposal, lease expiry, or 5 April 2029. The position prior to 6 April 2025 remains unchanged as outlined at EIM23150.
HMRC guidance provides the following examples which all relate to double cab pickups made available to employees, that are not of a construction primarily suited for the conveyance of goods or burden:
Example 1 – Employer A purchased a double cab pickup on 14 September 2025. As purchases on or after 6 April 2025 would be subject to the new rules, in this example the vehicle would be classified as a car and a car benefit charge would arise.
Example 2 – Employer B leased a double cab pickup on 10 December 2024. As this was leased before 6 April 2025, the previous rules continue to apply for Employer B until the earlier of the lease expiry, or 5 April 2029.
Example 3 – Employer C purchased a double cab pickup on 10 January 2024. This was subsequently traded in on 10 April 2025 for another double cab pickup. The previous rules apply to the first vehicle for Employer C until the trade in point on 10 April 2025. As the new double cab pickup was purchased after 6 April 2025 it will represent a car under the new rules and a car benefit charge would arise.
Example 4 – Employer D placed an order for a double cab pickup on 5 January 2025, but this was not available to the employer until 2 September 2025. As the agreement was entered into before 6 April 2025, the previous rules continue to apply for Employer D until the earlier of disposal, lease expiry, or 5 April 2029.
For the tax treatment of double cab pickups from 6 April 2002 to 5 April 2025 please see EIM23150.
What about capital allowances?
For expenditure incurred on or after 6 April 2025 (1 April 2025 for Corporation tax) HMRC will no longer interpret the legislation that defines a car for capital allowances purposes as excluding double cab pick-ups with a payload of one tonne or more. Section 268A(1)(b) Capital Allowances Act 2001, which defines a car as a vehicle other than one of a construction primarily suited for the conveyance of goods or burden of any description, will be interpreted in accordance with the guidance at CA23510. It follows that most, if not all, double cab pick-ups, which are equally suited to convey passengers or goods, will be classified as cars under this provision.
Transitional arrangements will apply when an amount of expenditure is incurred on a double cab pick-up as a result of a contract entered into before 1 April 2025 for Corporation Tax and 6 April 2025 for income tax and the expenditure is incurred on or after that date but before 1 October 2025. In these circumstances a double cab pick-up with a payload of one tonne or more will continue to be treated as a van – HMRC has provided some examples at CA23511.