HMRC surprised all taxpayers who own a double cab pickup as a company vehicle on 12 February by announcing that these vehicles would be classified as cars and not vans, which would have led to higher tax liabilities for both employers and employees.
HMRC had initially confirmed that, from 1 July 2024, double cab pickups (DCPUs) with a payload of one tonne or more would be treated as cars for both capital allowances and benefit-in-kind (BIK) purposes.
However, following discussion with farmers and those in the motoring industry, on 19 February the Government has reversed their decision so DCPUs will continue to be classified as vans.
How will this affect me?
In short, it means your tax obligations will remain as they did before HMRC introduced its guidance on 12 February.
Those with company DCPUs with a payload of one tonne or more which is available for both business and private use will still be subject to a benefit in kind.
However, DCPUs will now continue to incur a flat rate ‘van’ BIK instead of the higher rates applied to company cars, which are based on the vehicle’s CO2 emissions and list price.
As a result of HMRC’s U-turn there is no immediate need to re-evaluate your choices, although it may still be worth considering electric cars, for example, for future purchases, if you wish to pay an even lower rate of tax.
How will this affect my business?
Sole traders, partnerships and companies will no longer have to apply reduced capital allowances (either 6% or 18%) which are applicable for petrol and diesel vehicles, and which would have been dependent on CO2 emissions.
Instead, you can continue to claim Capital Allowances as before. As DCPUs will now continue to be classed as a van, you will be able to benefit from the Annual Investment Allowance (AIA) at 100%.
Is it time to switch to an electric vehicle?
Although HMRC reversed its decision, you might still want to consider switching to electric when the time comes to changing your vehicle(s).
Currently, new electric vehicles are entitled to Enhanced Capital Allowances (ECAs) which permit the deduction of the full cost from profits before tax.
Also, your electric vehicle will incur lower BIK rates compared to a petrol or diesel car.
This may reduce tax liability for employees if they use your business’s car for personal use.
If you use a vehicle for your business and want advice for your tax obligations, please get in touch with us today.
