Car or Van? – HMRC Rules

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:

  1. Benefits in kind, where car and fuel benefits are linked to a scale of CO2 emissions, whereas vans are on flat rates.

  2. 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:

  1. a goods vehicle

  2. a motor cycle (essentially a vehicle with less than four wheels)

  3. an invalid carriage

  4. 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:

  1. It must be constructed – or adapted – mainly for carrying passengers.

  2. 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:

  1. vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver

  2. caravans, ambulances and prison vans

  3. vehicles of three tonnes or more un-laden weight

  4. special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles

  5. 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:

  1. It has a payload of more than one tonne after the extra seats have been added.

  2. 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 Kombis multi-purpose vehicles because the vehicles were suitable “to enable workmen to be taken to work and for goods to be carried”

15 thoughts on “Car or Van? – HMRC Rules

  1. Hi . Im a full time private landlord self employed. I need a van to carry out repairs and maintenance on my properties. There is alao an element of private use. So i need seats in the back. Can i buy a crewcab or a kombi van like a ford transit custom kombi or Mercedes vito dualliner and claim 100% annual investment allowance.

    1. Philip. As you are self employed, then any vehicle that you run through your business would either be reimbursed through a HMRC agreed mileage allowance, or the cost of running your vehicle would be apportioned by your private and business mileage. The Blog is for Directors or employees of Limited Companies. Also if you are not a full time landlord (ie self employed), then the only vehicle cost allowable would be the mileage allowance. You can get capital allowances on the purchase of a vehicle, although they would be apportioned. I hope this helps?

  2. When a large group of people is going to the same round trip, we spend on two or more small cars , which means the value can be multiplied by the number of cars. If we choose to rent a 12 passenger van or a 15 passenger van, we can avoid the car rental amount.

    1. Unfortunately the rules don’t apply to short term rentals. The passenger van may still be a good decision for your business.

  3. Hi Martin, I’m a director of a limited company. I’m about to purchase a car derived van. Estimated business mileage 15k per year. Potential private mileage maybe 2k per year. Would you recommend buying this through the company or buying privately and charging the company for business miles?

    1. Hi,
      A very similar situation, I am a director and owner of a limited and VAT registered company and looking at along wheel base Renault Traffic crew van (So a row of seats behind) it has a fixed bulkhead and 1040kg payload with 40m3 load capacity and with annual business mileage around 20/22k and private use is virtually nil as I have use of another private car
      The use is all business and most of the time myself and one other in the van with product presentation equipment and expo kit (portable freezers, oven, tables and stand construction items) , but occasionally need to take up to another two people when setting up exhibitions.
      Reading up I am a bit concerned that whilst i am sure we can reclaim the VAT are we are risk of the HMRC claiming we need to pay BIK ?

      1. John,
        There will be a BIK, as virtually nil is not nil. However, the BIK is much lower than for an equivalent car. BIK in the current year is £3350. Make sure any private fuel is not charged to the company, otherwise there is a fuel benefit of £633. Remember the benefit is charged at your marginal rate of income tax. If you can establish a procedure whereby the vehicle is only used for business, then there would be no BIK! HMRC will allow the van to be kept at home and will allow occasional private use – but be careful!

  4. Hi Martin,

    I’m considering changing from a Hybrid SUV to a double-cab pick up as my next company car. Are the current BIK rules in place for LCV’s, the fixed rate of £3,230 for a 20% tax payer likely to remain in place?

    1. Quinncy,
      The current year rate is £3350. HMRC are gradually increasing this, but it is better than the BIK for an equivalent car.
      Regards Martin

      1. Hi Martin,

        Thanks for confirming. In terms of qualifying criteria, the only two things I am aware of are:

        1. The vehicle must have a design weight of less then 3,500kg to qualify as an LCV.

        2. The vehicle must have a pay load of more than 1000kg.

        Is there anything else I need to consider from BIK aspect?



  5. I work for a large company, but getting confusing messages about bik and hope you can help.
    Looking at a double-cab pick-up with a payload in excess of 1 x tonne. This is to be fitted with a canopy top, racking and drawers which will reduce the payload below 1 x tonne. The vehicle will be doing around 30k miles per annum of which around 5k miles will be private use. 1 x user only as main vehicle for business/private use where office is at home.
    The vehicle is used to demonstrate a technology that utilises the racking and drawer system to show to prospect rive clients across the UK. It will also be used as the basis for a stand at various shows/exhibitions throughout the year.
    The pick-up will be logo’d and have a tracker fitted.
    What would be the bik for me as either a 25 or 40% tax payer or would it be classified as a company car due to the additional weight of the racking/drawers/canopy?
    If it still complies as a commercial vehicle, would it be mandatory to have it logo’d and a tracker fitted?

    Thanks & regards

  6. I am self employed and need to by a van with a row of seats in the back. If I buy a Lwb T32 and fit seats in the back then I have a larger load space than seating and still able to carry over a ton after seats are accounted for. Would this be acceptable for capital allowance? There will be limited personal use so I’m assuming a 80/20 split would allow for this?
    Thanks for your help, getting very confused trying to figure out what’s allowed and what’s not.

  7. Why did I pay vat on a ford tourneo 9 seater?
    The logbook is M1, classed as an estate car on logbook.
    Every way it is classed as a car and seats have never been taken out as used only for family.
    Been going round in circles for ages, any help please.

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