Benefits – Classifying Cars versus Vans

HMRC are raising awareness of how vehicles should be classified for benefit in kind purposes.

On 20th July 2020 the Court of Appeal handed down its decision in respect of appeals by HMRC and Coca-Cola European Partners Great Britain Ltd. The case considered 3 different vehicles and whether they should be classified as vans or cars.

The appeal concerned three types of vehicle provided to Coca-Cola employees – a Vauxhall Vivaro, a VW Transporter T5 Kombi van and a slightly different VW Transporter K5 Kombi van. The vehicles were based upon panel vans but some modifications were made to the vehicles (e.g. to the seating, windows, partition, racking etc).

The decision agreed with HMRC’s longstanding interpretation of the car benefits legislation, which is that for benefits purposes theconstruction’ of a vehicle is that of the final product when it is made available to the employee, and the use to which a vehicle is put, is not relevant when considering the meaning of construction. The courts also explained that the correct approach was to determine what a vehicle was first and foremost suitable for. Only if the predominant suitability of the vehicles in question was for the conveyance of goods or burden, would it be accepted as a van. You should also bear in mind, the courts ruled that a multi-purpose vehicle can have no primary suitability at all.

You can read more guidance on helping employers determine the correct classification of a vehicle for benefit in kind purposes. This will be of particular importance to employers that need to report company vehicles on a P11D (for more information read the additional article ‘Reporting expenses and benefits for the tax year ending 5th April 2023’) prior to the filing date of 6th July 2023.

PAYadvice.UK 20/4/2023

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