The Court of Appeal has recently ruled that three types of modified crew-cab vehicles are cars rather than vans for tax benefit purposes. With thousands of employees in the UK using these multi-purpose vehicles, the case has potentially expensive consequences for both employers and employees.
The background
You may remember that there has been a long running dispute over the difference between cars and vans, which we wrote about here. (https://www.ergrove.co.uk/blog/coca-cola-v-hmrc/). It seems that this dispute has now been resolved in an Appeal Court case Payne, Garbett & Coca-Cola European Partners GB Ltd brought against HMRC.
Coca-Cola had been using three types of modified vehicle (VW Transporter T5 Kombi, and Vauxhall Vivaro) which had a second row of seats behind the driver, known as a ‘crew cab’. Employees were allowed to use them privately, which meant that they classed as a benefit in kind. Coca-Cola designated these vehicles as vans, but HMRC maintained they were cars, which meant that they were less beneficial for tax purposes. This was because they did not fit the description of a ‘goods vehicle’ in the benefit in kind legislation which is ‘a vehicle of construction primarily suited for the conveyance of goods or burden.’
The latest development
After a long and drawn out process, The Court of Appeal has now determined that all three of the vehicles are multi-purpose vehicles, capable of carrying both goods and people and that none of them fit the description of a goods vehicle in the legislation.
In particular the court noted that the vehicles were ‘equally suited’ of carrying goods and people rather than ‘primarily suited’ to goods, hence their decision that for benefit-in-kind purposes, they therefore need to be taxed as cars.
What happens next?
It is possible that Coca-Cola may be able to appeal to the Supreme Court, however the result from the Court of Appeal is binding and therefore until such time as another appeal is lodged, employers must be careful to take this decision into account when preparing P11D information for the tax year 2020/21. Some employers may need to look at their returns for the last two years, and take advice as to whether tax now needs to be recalculated. Where a vehicle has not been reported in line with the HMRC guidance available at the time (and now with the Court of Appeal decision), there is a potential risk of an HMRC enquiry.
If you use multi-purpose vehicles with crew cabs, and are concerned about any of the above, please contact your accountant for advice.