11 June 2024

Susan Ball, employer tax partner at RSM UK, highlights the U-turn by HM Revenue and Customs (HMRC) on rules around double cab pickups (DCPUs) and the things payroll practitioners can do to influence government decisions


Cast your mind back to earlier this year, when HMRC announced it was changing the tax rules regarding DCPUs.

The change originated from a 2020 Court of Appeal judgment in Payne & Ors (Coca Cola) v R & C Commrs [2020] BTC19 (see https://ow.ly/XPAp50RMVEQ).

Despite HMRC being asked in the intervening years, its guidance on how it thought DCPUs should be treated for benefit in kind (BiK) purposes was only updated on 12 February 2024. HMRC stated that from 1 July 2024, all DCPUs with a payload of 1 tonne or more would be treated as cars rather than as goods vehicles, for BiK purposes. This therefore sent costs soaring for many businesses. There was uproar from impacted parties, who pointed out that HMRC had not consulted its stakeholders, despite the normal process being that it would engage its various stakeholder groups in discussions to fully understand the impact and to review draft HMRC guidance.

Extensive lobbying occurred by various sectors including the motoring industry and agriculture, not just to HMRC but also to Members of Parliament, with blanket news coverage of the issue.

Just a week later, however, the government performed a spectacular U-turn on its decision, when on 19 February, HMRC issued the following statement: “The government has listened carefully to views from farmers and the motor industry on the potential impacts of the change in tax treatment. The government has acknowledged that the 2020 court decision and resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.”

It went on to say that the government would now be legislating to ensure that DCPU vehicles continue to be treated as goods vehicles for tax purposes, with draft legislation available for consultation, to ensure it achieves its intended outcome before being introduced in the next available Finance Bill.

This means everything would be remaining exactly as it was. So, to recap for those in the process of completing P11Ds:

  • there will be no change to the treatment of DCPUs from 1 July 2024
  • DCPUs with a payload of 1 tonne will continue to be treated as goods vehicles for capital allowances and BiK purposes, as they are at present
  • DCPUs with a payload of less than 1 tonne will continue to be treated as cars.

So, does the government change its mind? In short, yes. What’s clear from the outcome is that stakeholders can educate the public, policymakers and businesses about the implications of tax policy changes. You can do this on your own, through your membership body or both.

Here are some key points to consider:

  • influence policy decisions: when you respond to HMRC consultations or draft legislation changes, you have the opportunity to shape tax policies and regulations. Your insights and feedback can directly impact how tax laws are formulated and implemented
  • voice your concerns: documents often address specific issues or proposed changes. By responding, you can express your concerns, highlight potential challenges and suggest alternative approaches. This ensures that your perspective is considered during policy development
  • stay informed: engaging with such documents keeps you informed about upcoming changes. It allows you to understand the rationale behind proposed reforms and their potential implications. This knowledge helps you plan and adapt your strategies accordingly
  • compliance and transparency: responding to consultations or draft legislation changes demonstrates your commitment to compliance and transparency. It shows that you’re actively participating and helping with the development of fair and effective tax systems
  • mitigate unintended consequences: sometimes, policy changes can have unintended consequences. By providing feedback, you can help identify potential pitfalls and suggest adjustments to minimise adverse effects.

Remember that you don’t need to respond to every question in a consultation document. Partial responses focussed on relevant aspects are welcome.

For more information, you can explore ongoing and closed tax policy consultations on the GOV.UK website here: https://ow.ly/Yy2I50RMVWp.

For further information on DCPUs, see HMRC’s manual: EIM23150 - Car benefit: double cab pickups here: https://ow.ly/s97050S0CnV


 

This article featured in the July - August 2024 issue of Professional.