Is it a car or a van – the final instalment in the saga?

UPDATE 19 February 2024: Following the Coca Cola case mentioned below, HMRC had announced that it was going to change its guidance with effect from 1 July 2024, as follows:  See:

• HMRC Capital Allowances Manual CA23511, and
• HMRC Employment Income Manual EIM23151

However, it then quickly reversed its position and issued the following guidance:

"HMRC have today announced that its existing guidance will be withdrawn, meaning that DCPUs will continue to be treated as goods vehicles rather than cars, and businesses and individuals can continue to benefit from its historic tax treatment.

This move is resultant of the government making clear that it will be legislating to ensure that DCPU vehicles continue to be treated as goods vehicles for tax purposes."

The Coca Cola case 

In 2017 HMRC challenged the tax status of a number of vans provided by Coca Cola to their employees as company vehicles. The vans were a mixture of Vauxhall Vivaros and two versions of VW Transporter Combi T5s. All were of a panel van construction and, after adaptations, had been fitted out with racking inside for the goods that the employees had to carry, an additional row of seats behind the driver’s seat and a bulkhead between the rear seats and main load compartment, creating a vehicle with three compartments.  The VW seats were supplied by VW with the vehicles and could easily be removed while the Vauxhall seats were fitted post-production but were bolted down.

In the opinion of Coca Cola, the vans all met the definition if the HMRC guidance for a Combi-van – despite having seats and windows behind the driver, they were rated to carry sufficient payload (1 tonne) to be regarded as goods vehicles.  

HMRC disagreed, assessed Coca Cola for the additional National Insurance that would arise on them if they were cars, and assessed the employees for income tax on the higher benefit in kind charges. 

Act 1 – The First Tier Tribunal

Coca Cola appealed to the First Tier Tribunal (FTT) and won in respect of the Vauxhalls but lost in respect of the VWs – somewhat surprising given that the VWs had removable seats and the Vauxhalls permanent. 

The FTT determined that the Vauxhall, in having some load carrying capacity in the middle section, was (marginally) more suited for the carriage of goods and so remained a van but the VWs were equally suitable for both goods and passengers. Since they were not primarily suitable for the carriage of goods, the VWs were classed as cars but the Vauxhall remained a panel van. 

Act 2 – The Upper Tribunal

Both parties appealed to the Upper Tribunal (UT) which confirmed the FTT decision. 

Unlike the FTT decision, UT decisions form a binding precedent so, following that decision, it seemed that it was then the law that a VW Combi T5 is a car. To report otherwise on a P11D could be regarded as a deliberate misstatement on a tax return – tax evasion in other words.  It also appeared to be the law that a Vauxhall Vivaro was a van.

But, looking deeper, this did not really add any clarity to this interminable issue. The judgment related to vehicles that had been adapted by the owners, do may not be relatable to other vehicles, and the difference between the treatment of the two types seemed illogical, if not actually perverse. 

Act 3 – the Court of Appeal

Both the taxpayers and HMRC appealed again.  They agreed that to treat each vehicle differently was wrong but differed on what that treatment should be. 

HMRC wanted the Vauxhalls treated as cars and appealed on two grounds while the taxpayers wanted the VWs treated as vans and raised three grounds for that appeal. 

The Court found for HMRC on every point, the result of which is that the Vauxhall Vivaros were found to be multi-purpose vehicles and so not primarily constructed for the carriage of goods and so are to be taxed as cars. The VW Transporter’s status as cars was confirmed.

Where does that leave us?

Having read the judgement in detail, it is very hard to see how any combi-van – a panel van with additional seats – can now be anything other than taxable as a car. 

These particular vehicles were better suited for the carriage of goods than many combi-vans, having bulkheads to protect the passengers from the load and so more capable of carrying a larger load as well as passengers.

Any van will have a passenger carrying capacity, in the front next to the driver, but a driver is likely to need a mate (or two – many vans have three seats in the front) to assist in the unloading and if he is there for that purpose then he is part of the load, not a passenger. But that cannot apply to additional passengers as none of these vehicles are particularly large – vans have a maximum payload of 3 tonnes –  so while the loads may be bulky and/or heavy and a driver may need help, it is not reasonable to need more than two or three to handle the loads. 

It then follows that the purpose of carrying the additional passengers is not to assist in the carriage of goods but to transport the passengers to a place for another purpose. That then makes the vehicle a multi-purpose vehicle, not primarily a goods vehicle, and it is taxed a car. 

And to avoid yet more protestations from desperate owners, throughout these arguments, the Road Tax status of these vehicles, or their registration at the DVLA, is irrelevant – the income tax/NI status and their registration and road tax status are separate matters and one does not affect the other.  

Actions required

We are therefore repeating our warnings from 2019 (when the tribunal reported) but now there is even less wriggle room. 

We will, now that the case has been settled, hopefully receive some guidance from HMRC as to their approach to previously submitted P11Ds – will they seek their amendment, or will they only look forwards? If they look back, how far will they go? Four years is the norm, or will they go back only to 2018/19, when the upper tier tribunal reported?

Everyone with a Combi van in their fleet needs to think about how their vehicle has been treated. 

• P11Ds should be reviewed and at-risk cases identified. 
• But where a Combi has been treated as a van, they may not have been shown on a P11D at all – if the Combi was considered to be a van and was only used for work and normal commuting, there would have been no benefit, so it is not just a case of reviewing P11Ds but also considering unreported vans. 
• If any have been incorrectly classed as vans, and have been used for commuting, then a full fuel scale charge will be triggered and consideration should be given to making good the private/commuting fuel at least back to 6 April 2020 so that the fuel scale will not apply to the next round of P11Ds. 

If you are considering buying a Combi-van, then stop and think – do you need it or is it just convenient. Are you prepared to pay tax on the benefit as if it were a car? If not, then play safe, and buy a proper van with just one row of seats and no windows on the rear sides.

Will there be an Act 4?

What about other vehicle types? Who is next on HMRC’s hit-list?

Is a double cab pick-up primarily suitable for carrying goods, primarily suitable for carrying passengers or is it a multi-purpose vehicle? It would not be a huge surprise to see them lined up as HMRC’s next target in this saga. 

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