Van or car? The classification may not be as clear as you think

01 Oct 2020

There are numerous benefits to buying a van as opposed to a car for your business – you can claim back the VAT and the taxable benefit in kind is usually less than a car (unless electric).

As the benefits of owning a van outweigh that of a car it important that your supposed vehicle falls under the classification of 'van'. This may seem rather straightforward but HMRC's definition has been vague - resulting in some falling victim to tax ramifications.

Previously, if the vehicle is capable of transporting goods and has a 1-tonne payload it has been treated as a van; regardless of additional seats being behind the driver.

Recent developments in a case with Coca Cola have brought into question a lot of these predetermined classifications – highlighting how this status may come under scrutiny from HMRC. 

The Coca-Cola Case

Coca-Cola provided its employees with vehicles with the second row of seats behind the driver – the design of the vehicle, however, was based on a panel van design. Coca-Cola argued that these vehicles were vans. HMRC said that they were cars.

It was decided that because the vehicles were multi-purpose they couldn't be considered a van. Therefore, they had to fall into the 'car' categorisation – this meant they had to be taxed accordingly.

Classification

Your van could be classed as a car if:

- It has a row of seats behind the driver

- It has a dual purpose e.g. It can carry goods and passengers

If your van fits these criteria then it may be time to consider if it is used as a van or car. Now that it has been investigated HMRC may be looking more closely at the classifications and may resort to a harsher approach than previously conducted.

For more information surrounding the guidance on the difference between cars and vans for tax purposes visit HMRC's website HERE.