WHEN is a van not a van? – when the taxman deems it to be a car.
The distinction between a van and a car can have significant implications for tax particularly with respect to how they are treated for benefit in kind purposes – a van would generally have a lower benefit in kind charge than a car.
This issue came to light in a case at the Court of Appeal which held that some vehicles were not necessarily used the carry goods and so should be treated as cars for the purposes of determining the cash equivalent of BiK.
The appeal concerned three types of vehicle provided to employees by the employer, Coca-Cola European Partners Great Britain Ltd (Coca-Cola) which HMRC had assessed as being cars:
- a Vauxhall Vivaro;
- a VW Transporter T5 Kombi van (Kombi 1) and;
- a slightly different VW Transporter K5 Kombi van (Kombi 2).
The First-tier Tribunal (FTT) had held that the Vauxhall Vivaro was primarily suitable for the conveyance of goods or burden, even with the addition of two further passenger seats, and was therefore a van, but that because a VW Transporter T5 Kombi van (Kombi 1) and a slightly different VW Transporter K5 Kombi van (Kombi 2) were equally suitable for carrying goods and passengers, they were therefore not primarily suitable for the conveyance of goods or burden and so should be treated as cars.
The decisions on Kombi 1 and Kombi 2 were appealed by the taxpayers and The Upper Tribunal (UT) upheld the decisions of the FTT and so all parties effectively repeated their respective appeals in the Court of Appeal.
The three vehicles were all based upon panel vans, but third-party contractors made slightly different adaptations to each of the vehicles including adding seats, windows, panelling, racking, strapping, cargo nets, cargo tracks, shelving and storage units.
The case hinged on whether the vehicles in question were “primarily suited” to the conveyance of goods or burden. If so, then they would be vans; if not then they would be cars.
The Court of Appeal dismissed the appeals in respect of Kombi 1 and Kombi 2.
The court also found that the FTT and UT had been wrong in law to distinguish the Vivaro “on a narrow balance” or “fine margin”. The construction of the Vivaro was very similar to that of Kombi 2, in that it had removal storage units in the mid-section which were interchangeable with seating. The Vivaro, it held, was also a multi-purpose vehicle which was not primarily suited to the conveyance of goods.
Accordingly, HMRC’s appeal was allowed and all three vehicles are cars for the purposes of income tax.
Craig Hughes, Tax Director at Brown Butler said the case has wide ramifications as large numbers of employees are supplied with these vehicles or others of a similar nature. The case turned on fine margins and any other case would need to be looked at on its own fact pattern.
He said: “One point to note is what impact this may have on double-cab pickups which are usually treated as vans. Arguably, a double-cab pickup is less suitable for the conveyance of goods or burden than the Vivaro and Kombis in this case, because its seating and load areas are permanently fixed.
“Nevertheless, HMRC has accepted for many years that a double-cab pickup (assuming it has a load capacity of at least 1 metric tonne) is a van for the purpose of tax.
“The result from the Court of Appeal is binding, although we are waiting to hear if an appeal to the Supreme Court can be made.”
HMRC does have a list of car-derived vans and their classification