Van or Car? The Tax Implications

Whether your vehicle is classified as a van or car can have wide reaching tax implications.

If your vehicle is classified as a van, then your business will be able to reclaim any input VAT paid and claim Annual Investment Allowances in your corporate tax return. This tax treatment would not be available if the vehicle is classified as a car. In addition, employee Benefits in Kind (“BIK”) on vans are charged at a flat rate, and for a van with no or insignificant private use there is no BIK charge. BIKs for cars however are higher and based on a combination of CO2 emissions and list price.

The rules for determining whether your vehicle is a van or car are complex, especially in relation to certain types of vehicles such as double-cab pick up trucks or combi vehicles, which are capable of carrying passengers as well as conveying goods or burden. A recent case at the First Tier Tribunal HMRC V Coca-Cola (GB) Ltd has muddied the water further, adding greater complexity and uncertainty to the question.

It is important to apply the correct treatment in order to avoid any unnecessary HMRC enquiries and penalties. As a first point of call you can check your DVLA Vehicle Registration document for an indication of how the car will be classified. However this is not conclusive for tax purposes.

If you are uncertain and would like further advice then please contact our tax team at hello@garbutt-elliott.co.uk – 01904 464 100