Just a week after it announced changes to how commercial double-cab pick-ups are treated by VAT, the Government backtracked on its proposals. But just because the government has walked back on it doesn’t mean it will always oppose the idea.
So, what were the proposed changes, and what is all the fuss about?
The original plan
The changes all concerned double-cab pickup trucks with a payload of more than 1,000kg (or 1,045kg with a hardstop installed). Historically, these vehicles have been considered commercial vehicles, allowing business owners to reclaim tax on purchases—just like with vans. For our purposes, ‘double cab’ means a pickup truck with four seats.
In February, HMRC announced that it would start classing these vehicles as cars, which would have seen company car drivers face an increase in their tax bills for any such pickup purchased. The decision can be traced back to a 2020 Court of Appeal decision, which found the VW Kombis and Vauxhall Vivaro to be cars for tax purposes because:
- The vehicles were visibly more ‘transit’ than ‘pick-up’
- They were ‘multi-purpose’ in nature.
There was an exception: double-cab pick-ups that had been modified to remove the two back seats and fittings would still be considered commercial vehicles.
The practical change
Company vehicle tax is based on benefit in kind, which is a percentage based on cars’ CO2 emissions. Therefore, the system favours electric and hybrid cars emitting lower CO2.
However, pick-up trucks are charged a flat rate of £3,960 for the 2023/24 tax year. That might sound like a lot, but it’s not as much as the tax on company cars calculated based on CO2 emissions.
In fact, according to the Professional Pickup website, the changes would have seen a driver using a Ford Ranger Wildtrak 2.0 as a company car face a tax bill of £290 a month, or £580 a month for a higher-rate taxpayer. That means a driver could have spent £5,376 more on company car tax per year under the new rules.
Could the change still go ahead?
In its announcement that it would be scrapping the change, HMRC said, “The government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax treatment”.
It added, “The government has acknowledged that the 2020 court decision and resultant guidance update could impact businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.”
With this, it seems unlikely that the government will try to enact this policy again. Nevertheless, anything is possible, so you shouldn’t just assume this change – or something like it – won’t go ahead.
Therefore, it’s essential to stay on top of all the recent tax news in the UK. The quietness with which the change was proposed is all the more reason to do so.
Keep up to date with all tax and business developments with PBA Accountants. Catch our daily news feed, read our latest blog post and stay updated by letting us help you directly with your tax affairs. No change to policy will sneak up on you ever again.