Court of Appeal rules modified crew-cab vehicles are cars and not vans for benefits purposes
A long running case concerning the subtle difference between cars and vans (Payne, Garbett and Coca-Cola European Partners Great Britain Ltd v HMRC) has recently been resolved in HMRC’s favour, with a decision that is expected to have significant consequences for employers and employees.
Two types of multi-purpose vehicles were provided by Coca-Cola for its employees – VW Transporter Kombi and Vauxhall Vivaro – with both being treated as vans for benefits in kind (BIK) purposes. But HMRC contested that they were cars and as such carry a much higher BIK charge, taking their challenge to through the tribunals and most recently the Court of Appeal.
At the core of the case was the definition of a van for benefits purposes – “a vehicle of a construction primarily suited for the conveyance of goods or burden.” If the vehicle does not fit within that definition, or qualify for other exemptions, it defaults to being treated as a car. For many years now, the increasing number of multi-purpose and double-cab vehicles have created uncertainty as to which side of the dividing line they fell, so a case such as this was perhaps long overdue.
After proceeding through the First Tier Tribunal and Upper Tribunal stages, the Court of Appeal (CA) has ruled that both the Kombi and Vivaro were multi-purpose and as such were not primarily suited to any particular use. The CA also confirmed the earlier tribunal decisions that the “construction” of the vehicle should be taken at the state it was provided to the employee, including any post-factory modifications.
Implications for employers and employees
The CA decision is binding, so employers will need to take this decision into account when preparing P11D forms for 2020/21 onwards – subject to any appeal to the Supreme Court (if permitted).
Employers should look to review if they have any such multi-purpose vehicles and how they have been treated for BIK purposes. One problem is that if such vehicles have been treated as a van, they may not have been reported on a P11D (if their private usage was within permitted limits), so employers will need to review their wider vehicle fleet, not just focus on P11D submissions.
For any vehicles that are affected, where private fuel has also been provided it may be worth reviewing whether mileage logs can be used to make good all private fuel provided since 6th April 2020, to avoid a fuel scale charge in addition to the car benefit.
Any employers considering buying crew-cab vehicles should now proceed with caution. If a vehicle is genuinely needed primarily to carry goods, then best advice would be to purchase a clearly definable van – with just one row of seats and no windows on the rear sides. Any vehicle that has a second row of seats and rear windows runs the risk of being treated as a car following this case.
Where does this leave double-cab pickups?
What is not yet clear from the outcome of the Coca-Cola case is what this means for double-cab vehicles. The crew-cab vehicles in this case all had an enclosed panel van shape, whereas double-cab pickups have an enclosed passenger space and a separate open payload area. A double-cab pickup is also less flexible than the Vivaro and Kombis in this case, with seating and load areas being typically permanently fixed and not easily modified.
That said, it is worth noting that HMRC has accepted for many years that double-cab pickups (with a payload capacity of at least 1 metric tonne) is a van for the purpose of tax, as their own Employment Income Manual (EIM23150) confirms. But given the outcome of this case, it would not be surprising if HMRC looked to double-cabs as their next target.
Earlier years’ P11D amendments?
Although this case means a change in treatment for 2020/21 P11Ds, what about previous P11D submissions? HMRC might take the view that – as the Upper Tribunal judgment in the Coca-Cola case was released in March 2019 and their own Employment Income Manual guidance has stated its view on the definition of a van for many years – such vehicles should also be treated as cars for 2018/19 and 2019/20, meaning corrections may be needed. This would be at great tax and NIC cost to employers and even more so employees.
Now that the case has just been settled, and given the wide-reaching ramifications for employers and employees, we are hoping that HMRC will issue some guidance and clarification on the position for earlier years’ P11D submissions.
If you have any questions or queries please contact Richard Whitelock – email@example.com