When is a van not a van?

A recent ruling that not all vans are vans for tax purposes and are actually cars could give thousands of van drivers and their employers higher tax bills, according to accounting and tax advisory firm Blick Rothenberg.

In a recent tax case involving Coca-Cola, the Upper Tribunal (UT) has held that not all ‘vans’ (in the common sense use of the word) are vans for tax purposes. Specifically, vans such as the VW Transporter Kombi T5 were held to be ‘multi-purpose vehicles’ rather than vans.

Robert Salter, a specialist in expatriate and employment taxes at the firm, said: “Any ‘van’ that is not held to be primarily a ‘vehicle for the transport of goods becomes classified as a multi-purpose vehicle (aka a car), and results in a car benefit charge arising for the employee, where there is any ‘private element’ to the vehicle’s use.”

He added: “This will apply even where private use is very insignificant compared to the wider use of the vehicle. For example, occasional commuting in the vehicle.”

Salter said: “The annual taxable benefit charge that accrues for employees in this regard can be substantial, as it based on the core (list price) of the vehicle when new and the vehicle’s CO2 emissions level. For example, if a vehicle impacted by this case had an official list price (cost) of £25,000 and had a CO2 charge of 25%, that could create an annual benefit-in-kind charge for the employee of £6,250 – which would create a tax charge for a 20% taxpayer of £1,250.

“Additionally, if the fuel costs of private motoring are also paid for by the employer (even inadvertently), employees can also face a fuel benefit charge based on the car fuel rules rather than the (much cheaper) van fuel benefit rates.”

Salter added: “While HM Revenue & Customs haven’t formally, altered their guidance in this area following the UT’s ruling, it is probable that the Revenue will regard this as a major opportunity to gain additional Revenue from ‘white van man’.

“In addition, their employers will face an additional NIC (employer only) liability of 13.8% on the value of the car scale and car fuel scale tax benefit charges that arise for their affected employees.”

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