Vans for Business and Tax Relief Entitlement


Are you looking to buy a new or replacement van to use in your business? If so, do you know what HMRC considers a van for tax purposes? If not, you may find that the cost of the van has gone up due to the restriction in the tax relief.

Upper Tribunal Tax Cases

The reason for the potential problem in obtaining tax relief for the cost of the new business asset (van) is that following the recent two tax cases before The Upper Tribunal, two vans both used wholly and exclusively for business purposes, carrying goods and workers as passengers were treated differently for tax relief purposes on their costs. The two so-called vans in question were a Vauxhall Vivaro and a VW Kombi.

The Vivaros was found to be a van as it was originally built as a goods/equipment carrying van and subsequently converted to carrying workers/passengers as well the goods/equipment. The Kombi was found to be a car as it was originally built to carry workers as passengers with space for also carrying goods/equipment.

Results for the above-mentioned Upper Tribunal decisions means that the cost of the Vivaros qualifies for the 100% Annual Investment Allowance, whereas the cost of the Kombi is written off for tax relief under the Capital Allowances system, at the writing down allowance (WDA) rate for cars.

The WDA rate depends on the Kombi’s CO2 emission but can be 18% pa or as low as 8% pa on writing down balance basis. As can be seen, the Kombi is at a distinct disadvantage when looking at the after-tax cost of obtaining a business van, such post-tax cost becomes worse when you also consider:

  1. Benefit in Kind on a Van is at a Flat Rate (and could be zero if you have minimal private use) whereas a car is linked to its CO2 emission.
  2. You can reclaim VAT on Vans but it’s much harder to reclaim VAT on cars.

To summarise, a van is a vehicle where its primary construction is for the conveyance of goods or burdens. Kombi vans and those similar have not previously been thought to fall into this category due to them being designed to carry both goods and people – this has now been confirmed by the recent tax case as referred to above.

How we can help

Since 2002/03 HMRC has agreed to a concession to treat as a van for tax purposes if the payload capacity of the pickup, without its hardtop, exceeds a metric tonne.

The lesson to be drawn is that any garage selling the so-called van should be questioned as to the classification of the vehicle for tax purposes to ensure that it satisfies the HMRC definition of a van. HMRC do also have a published list of what they agree are vans, although it has not been updated since May 2015 – never the less, the HMRC list should also be consulted when SMEs are considering buying new or replacement vans for their businesses, to ensure that their after-tax cost is known.

Don’t hesitate to get in touch with a member of the HaesCooper team for more information related to buying vans for business, and tax relief entitlement. As reputable chartered accountants and tax advisers, we’re able to provide taxation advice – to ensure you and your company are paying the right amount of tax. 

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