When is a ‘Van’ a Van?

A recent court case has highlighted the classification of a VW Transporter Kombi van for Benefit In Kind purposes. The introduction of double cab pick-ups and Kombi vehicles has long sparked debate over whether they qualify as a car or a van, due to the dual purpose of transporting goods, yet also having the capacity to transport multiple passengers.

For double cab pick-ups and Kombi vehicles, HM Revenue and Customs, “HMRC”, do provide guidance, but until now, the treatment of said vehicle has been blurred, with HMRC and businesses on very different sides. Judgement was reached in the case, ‘Noel Payne vs HMRC’, that the VW Transporter Kombi was to be treated as a car, not a van, due to the fact the primary construction of the vehicle was not for the transportation of goods solely, but for transference of goods and people equally.

Distinguishing between a car, primarily constructed to carry people, and a van, primarily constructed to carry goods, is important in terms of Benefits In Kind as the treatment of the two differ vastly. With the VW Transporter Kombi now being classified as a car, taxable benefits, and the resulting tax and National Insurance change, will be significantly higher than if it was considered a van. Benefits in Kind will be linked to CO2 emissions and the list price when new on the Kombi, yet on vans a flat rate is applied. Value Added Tax ‘VAT’, will also be much harder to reclaim on the Kombi, yet reclaiming VAT on vans is simpler.

Although the ‘Noel Payne vs HMRC’ case has no legal precedent, direction is given to the interpretation to certain vehicles. If the classification of your businesses vehicles is challenged by HMRC, significant tax liabilities can fall due on employers, including picking up the employee proportion for tax purposes.

If you would like any further information or assistance in classifying your vehicles, or benefits in kind in general, please do not hesitate to contact us.