Just recently HMRC has been embroiled in a dramatic U-turn over Double Cab Pick Up classification. Read on to find out what happened.
What happened initially?
In case you hadn’t heard, on Monday 12th February 2024, HMRC amended its guidance and stipulated that from 1st July 2024, any Double Cab Pick Ups (DCPUs) with a payload of one tonne or more would be treated as cars rather than goods vehicles for both capital allowances and benefit-in-kind purposes. This would bring them in line with DCPUs with a payload of less than one tonne.
Why did this happen?
HMRC made this decision further to a decision made in a 2020 Court of Appeal judgement initiated originally by Coca-Cola. Coca-Cola had argued their four-seat crew cab vehicles should be subject to commercial vehicle taxation rather than private cars. The Court of Appeal sided with HMRC’s decision and these vehicles were classified as private cars. Hence, the decision was made on 12th February to change the Double Cab Pick Up classification.
Why does it matter?
Whether a Double Cab Pick Up classification is as a goods vehicle or a car has a major impact on the tax liability of a business.
If a DCPU is classed as a goods vehicle a business can reclaim 100% of the VAT for vehicles purchased or leased. This is not so for a car.
The capital allowances on cars are not as advantageous as a commercial vehicle and valuable tax relief would be lost.
Vehicle classification is important to any business. If a DCPU is classed as a car it dramatically affects employees who are provided with one as the taxable benefits in kind for employees would be far higher leading to both them and the business having to pay more tax.
What happened next?
The decision to class Double Cab Pick Ups as cars rather than goods vehicles created a huge backlash from those in the motor industry. They cited increased costs to their businesses, particularly those in the farming and construction industry.
Extensive lobbying by the farming and motor industries caused HMRC to reconsider their decision.
What is the outcome of the Double Cab Pick Up classification?
The Government have made a spectacular U-turn and will allow Double Cab Pick Ups with a payload of over one tonne to remain classified as goods vehicles. DCPUs with a payload of less than one tonne continue to be treated as cars.
It is stated on the HMRC website:
the government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax-treatment. The government has acknowledged that the 2020 court decision and resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.