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A Van is not Always a Van

02/12/2020

A recent case study before the Court of Appeal has found that a crew cab van provided by an employer for use by their employee/s is to be treated as a car, for the purpose of assessing income tax on the employee, and Class 1A NIC on the employer under the ‘benefits in kind’ rules. 

HMRC brought the case to the Court of Appeal of an employer that provided what was considered to be a transit van for the use of one of their employees. The van had been modified the van by installing a second row of seats behind the driver, with a gap in the middle of the row. 

The Court of Appeal has decided that this modification to the panelled van has reduced the goods carrying function of the van, to a secondary level. The definition of a van is that it must be a good vehicle – constructed to primarily convey goods or burdens. 

Given this case, all crew cab vans provided by the employer for the use by employees must be recorded to HMRC on the annual P11D as a car, and the employee taxed under the Income Tax Benefits in kind of rules. The employer will also be liable to Class 1A NIC on the scale benefit amount as attributable to this vehicle as a car.

In view of the above, you may want to review your crew-carrying vehicles to see if it would be tax efficient to move to using a different type of vehicle – perhaps a minibus available to a pool of employees or go electric!

The only good news is that currently, HMRC has not indicated that they will seek to apply the decision in the above-mentioned Court of Appeal case to other parts of the UK tax legislation e.g. VAT  and/or capital allowances. 

If you require support to review your commercial and private vehicles, don’t hesitate to contact us.