Certain modified crew-cab vehicles are now classified as cars
10 August 2020
In the case of Payne, Garbett and Coca-Cola European Partners Great Britain Ltd. v HMRC, the Court of Appeal found that three variations of modified crew-cab vehicles should be classified as cars, as opposed to vans, for the purposes of tax benefits.
The outcome of the case will have significant impacts for any employees and employers using or providing these types of multi-purpose vehicle.
The background to the case is that Coca-Cola provided employees with these three types of modified vehicle. Each of the vehicle types was based on a panel van design, housing a second row of seats behind the driver. The vehicles are commonly referred to as ‘crew-cab’ vehicles. Employees were able to use them privately, meaning that they would have been classed as a benefit in kind. The vehicles were first or second generation VW Transporter T5 Kombis, or Vauxhall Vivaros.
Coca-Cola asserted that all of these vehicles were vans, whilst HMRC argued that they were all actually classed as cars. Vans are more beneficial in terms of tax purposes than cars. The First Tier Tribunal found that, as Kombis are multi-purpose, they do not meet the criteria to be considered as vans and, therefore, should be classed as cars.
The First Tier Tribunal found that the Vivaro, however, could reasonably be classed as a van, but only on very specific grounds. If the second row of seats don’t span the width of the vehicle as they do in the Kombi then the vehicle could be classed as a van due to the extra load space in the centre of the vehicle. The Upper Tribunal agreed with this judgement.
The Court of Appeal, however, has stated that all three types of vehicle are multi-purpose vehicles as they are able to carry both goods and people, and none of them are ‘van-like’ enough so must be taxed in the same way as cars.
Benefit in kind legislation maintains that, in order to be classed as a van, the vehicle needs to be a ‘goods vehicle’. A ‘goods vehicle’ is defined as ‘a vehicle of a construction primarily suited for the conveyance of goods or burden.’ Where vehicles do not meet this definition, they will be taxed in line with how cars are taxed. As the vehicles had been altered, the wording ‘of a construction’ applied, and the Court of Appeal agreed with the lower courts that this should be taken as the condition of the vehicle following modifications, and in the state that it was given to the employee.
There were areas in which the Court of Appeal disagreed with judgements made in the lower court. The main one was how to interpret the term ‘primarily suited’. The Court of Appeal felt that this should be taken to mean ‘first and foremost’, so clearly more suitable for goods, and not just marginally suitable. The difference between the two vehicle types was not enough to differentiate them because both were equally capable of carrying either goods or people, and neither were primarily suited to the carrying of goods. Therefore, both vehicles could not be classed as vans for the purposes of benefits in kind.
For tax year 2020-21 onwards, employers must remember the outcome of the case when preparing P11Ds. Companies may need to carry out reviews of the company vehicles that they provide, and should also consider the implications of the ruling of the case when purchasing any additional company vehicles.
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