The HMRC rules determining whether a vehicle is a Car or Van are fairly complex. The comments below are the guidance provided by HMRC and we have provided a link at the bottom of the blog to the HMRC website for more information.
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There are several tax areas which rely on being able to determine whether a particular vehicle is classified as a car or a van:
Benefits in kind, where car and fuel benefits are linked to a scale of CO2 emissions, whereas vans are on flat rates.
Capital allowances, where vans qualify for annual investment allowance, whereas cars enter the main or special pools and qualify for writing down allowance only. Cars with qualifying emissions not more than 75g/km are entitled to 100% first year allowance.
VAT where input tax can be claimed on vans but not on cars (except in some very specific circumstances).
Car benefit definitions
Every mechanically propelled vehicle is a car, unless it is:
a goods vehicle
a motor cycle (essentially a vehicle with less than four wheels)
an invalid carriage
a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used
A goods vehicle is defined as a vehicle of a construction primarily suited for the conveyance of goods or burden of any description (excludes people). The test is of construction, not use. It is only if the primary purpose for which the vehicle is constructed is the carriage of goods that it will escape from being a car.
For benefit tax/NIC and VAT purposes, one must look at the construction at the particular time in question (time of transaction or in relevant tax year). VED is based on type approval at the time the vehicle is first registered.
A vehicle whose design weight exceeds 3,500kg is not a van, but a heavy goods vehicle.
Double cab pick-ups
These vehicles were very popular a few years ago when the van benefit in kind was much lower than the car benefit. The substantial increase in van benefit from April 2007 made this less of an issue, but there are still potential savings to be made. On the surface many double cab pick-ups appear to be equally suited to convey passengers or goods. However, when all factors relating to their construction are taken into account, a number of vehicles within this category do have a predominant purpose of carrying goods or burden. Each case will depend on the facts and exact specification. As a general rule, HMRC accepts that a double cab pick-up with a payload of 1 tonne (1,000kg) or over is a van for benefit purposes. The 1 tonne rule applies only to double cab pick-ups, not to any other vehicle.
Capital allowances definition This is almost identical to the benefits definition. Hire cars, taxis and driving school instructor cars are specifically included in the definition of cars.
VAT input tax recovery
VAT rules say that a car is any motor vehicle of a kind normally used on public roads. It must have three or more wheels and meet one of the following conditions:
It must be constructed – or adapted – mainly for carrying passengers.
It must have roofed accommodation behind the driver’s seat.
( The above either fitted with side windows already or be constructed so side windows can be fitted)
In addition, the following are not cars for VAT purposes:
vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
caravans, ambulances and prison vans
vehicles of three tonnes or more un-laden weight
special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles
vehicles with a payload of one tonne or more
Problem car-derived vans?
These vehicles, from the outside, still maintain the appearance of a car. However, from the interior the vehicles have the appearance and functionality of a van – the rear seats and seatbelts have been removed along with their mountings, the rear area of the shell is fitted with a new floor panel to create a payload area and the vehicle’s ‘side windows’ to the rear of the driver’s seat are made opaque. Such vehicles will be classified as vans, but all the criteria are very strictly applied.
Vans with rear seats
Some vehicles look like vans and don’t have windows in the sides behind the driver. But they do have additional seats for carrying passengers behind the front row of seats (or they’re designed so they can be fitted with them). They’re sometimes known as combination vans or combi-vans. HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:
It has a payload of more than one tonne after the extra seats have been added.
The dedicated load area (the load area that’s completely unaffected by the extra seats) is larger than the passenger area.
If it meets either of these conditions, then the vehicle is a commercial vehicle for VAT purposes and you can reclaim the input VAT if you follow the normal rules for reclaiming VAT.
HMRC has produced a list of car derived vans and vans with rear seats showing whether they’re classed as a van (commercial vehicle) or a car for VAT purposes: HMRC Link
There has been a recent case that has further confused the definition of what is a van.
Coca Cola vs HMRC
Legal decision Coca Cola and two of its employees took HMRC to the First Tier Tribunal when HMRC declared that the employees’ Volkswagen Transporter Kombi and Vauxhall Vivaros were cars and not vans. Both the Kombis and the Vivaros were bought by Coca Cola to transport vending machines to and from their designated locations and all had the following modifications: • additional racking • floor coverings • bulkheads (bulkheads are partitions that are located behind the seats in a van to separate them from the cargo being transported) The judge’s decision came down to his assessment on whether each vehicle had a “dual capability of carrying passengers and carrying cargo”.
For the Vivaro, the judge decided that “on a narrow balance, the construction of the Vivaro was primarily suited to the conveyance of goods” because: • the engine/transmission and the mechanical components (fuel tank, exhaust, rear suspension) of the Vivaro were mounted transversely and the driver’s position was set high, “each in order to maximise the load area and the load volume” • the sliding door and the rear door “facilitated loading” • the suspension was designed to carry a 3-tonne gross weight value • the braking system and components were designed to “operate effectively up to a maximum of 3,000 kg GVW and whilst towing a braked trailer of up to 2,000 kg” • the middle part of the payload section was taken up by seating which needed tools for its removal and that there was still enough space with the seating in to carry a payload
For the Kombis, the judge decided that the vehicles were not “constructed primarily” to be exclusively for the use of goods conveyance because: • the Kombi’s basic design characteristics were the same as the “VW Transport T5 panel vans such as the Shuttle and the Multivan…essentially minibuses designed to carry passengers”. • the Kombis were provided with seats which, when fitted, “took up most of the space in that sector. When the seats were removed, almost the entire area of the mid-section was available for conveyance of goods”. • the seating issue, mentioned above, made Kombismulti-purpose vehicles because the vehicles were suitable “to enable workmen to be taken to work and for goods to be carried”