Is it a Car or a Van? Here is the Tax Definition of a Van

HMRC are being urged to provide clarity on the tax treatment of commercial vehicles such as VW Kombi Vans marketed as goods vehicles. The need for clarity follows the ruling after HMRC’s tax tribunal case with Coca Cola. The courts rejected the appeals from Coca Cola regarding the classification of the VW Kombis as vans. So, what’s classified as a car and what’s classified as a van?

Well, the court upheld  HMRC’s view that certain vehicles are not goods vehicles but motor cars for benefit in kind purposes. The legislation states that a van must be a goods vehicle, primarily suited for the conveyance of goods Consequently, the income tax and national insurance payable by employees and employers are significantly higher than if the vehicles had been classified as goods vehicles.

Income tax exemption on vans

There is no assessable benefit in kind where the van is only used for business journeys or the private use of the vehicle is insignificant. For example, making a detour to pick up a coffee or newspaper on the way to work would be seen as insignificant.

What is the tax definition of a van?

The income tax legislation defines a van as a  “goods vehicle… of a construction primarily suited for the conveyance of goods or burden of any description…”. 

It is understood that the Coca Cola case is due to be heard at the Court of Appeal which will provide legal precedent over the tax treatment.

Until then employers are in a dilemma how should vehicles like those used in the Coca Cola campaign be reported? Should employers report such vehicles on employees P11d forms? The tribunal had to seek advice from automotive industry experts, so how are employers expected to interpret the rules?

To add to the confusion the benefit in kind rules are not the same as the rules for capital allowances and VAT.