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The Independent Automotive Aftermarket Federation

When is a van a car?

Date: Thursday 29 October 2020

Our colleagues at Xecutive Search have forwarded details of a ruling issued by the Court of Appeal which means that some crewcab vans are to be treated as cars for benefit-in-kind purposes.

Court. In Payne & Ors v HMRC [2020] EWCA Civ 889, the Court of Appeal issued a judgment that could have expensive consequences for thousands of employers and employees. The case examined whether three modified crewcab vehicles should be treated as vans or cars for benefit-in-kind (BIK) purposes.

Vehicle. Each van was based on a panel design, similar to a Transit or Vivaro. However, the discrepancy arose due to a modification meaning a second row of seats was installed behind the driver. Under the benefits code, for a vehicle to be a “van” it must be a goods vehicle, that is one “of a construction primarily suited for the conveyence of goods or burden”. The court made two significant observations:

• the term “of a construction” is applied after any modifications, so a van that has been converted, as in the vehicles in this case, can become a car; and
• “primarily suited” should be taken to mean first and foremost, i.e. the vehicle must clearly be more suitable for goods.

Multi-purpose. One of the vehicles considered was held by the First-tier Tribunal to be a van by a very narrow margin, owing to the second row of seats having a gap in the middle. The Court of Appeal’s intepretation means that this vehicle has also now been reclassified as a car.

Pro advice. This decision only applies for BIK purposes. It is unclear whether HMRC will seek to challenge the classifications of vans for other purposes, e.g. VAT.

Businesses that provide such vehicles to employees should take heed of this decision, and may wish to consider alternative vehicles going forward. In the meantime, the vehicles will need to be reported on the P11D using the car rules.

To qualify as a van, the vehicle must be “clearly more suitable” for goods than passengers. Businesses that have multi-purpose vehicles will have to report them on the P11D as cars, not vans.




This advice was taken from Tax for Professionals