Car driving through forest

U-turn sees HMRC launch consultation on tax breaks for double-cab pickups

Car driving through forest
In an unexpected update to HMRC guidance on 12 and 13 February.

HMRC announced on Monday 19 February that the classification of a double cab pickup for benefit in kind and capital allowance purposes would be changed, effective 1 July 2024. This original guidance was greeted with such dismay and anger that HMRC has now, however, partially reversed their position, promising to consult tax potential changes ahead of the Finance Bill.

As things stand, HMRC’s interpretation of the capital allowance and benefit rules are aligned with the rules for VAT purpose - i.e. vehicles constructed to carry a 'payload' of one or more tonnes are treated as a van rather than a car. This means recovery of VAT is not blocked, the vehicle can benefit from a 100% deduction under the capital allowance rules, and the taxable benefit of being provided with the vehicle is limited to the van benefit charge which is currently £3,960/year.

Following a Court of Appeal judgement in 2020, HMRC were looking to treat all double cab pickups as cars on the basis they are not 'predominantly' for conveying goods. Following this line of thought 'most if not all' double cab pickups could be classified as cars rather than ‘vans’ when calculating the benefit charge and when applying capital allowances.

In practical terms the annual benefit in kind charge for employees driving these vehicles could be as high as 37% of the vehicles list price for high emitting vehicles, or £22,000 per year on a £60,000 pickup with emissions over 200g/km of CO2. Add to this fuel benefit, which is £757/year for a van, but £10,286/year for the most polluting cars, and the tax burden for a 40% taxpayer could increase by more than £10,000 a year. Their employer who pays the respective national insurance on the benefit at 13.8% would also see a hike in their costs.

The different tax rules which apply between cars on the one hand and pickups on the other can make a significant cash difference.

After the U-turn the 1 July change of HMRC interpretation will now be restricted to those vehicles with a payload of less than one tonne.

We suspect that HMRC still have double cab pickups in their sights, and we now await details of the consultation and any following proposed legislative changes with interest.

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Simon Warne
Simon Warne
Partner, Private Clients