Van or car? Does it actually matter?

It does to your tax bill.

The taxable benefit of a van is £3,000.  Compare that to the way HMRC calculate the taxable benefit of a company car – a percentage (up to 35%) of the car’s list price based on its CO2 emissions.  For example, a Ford Mondeo  2.0 Ecoboost SCTi has CO2 emissions of 179 g/km and a taxable benefit of 27%.  With a list price of £27,725 that means £1,497 annual income tax for a basic rate taxpayer or £2,994 for a higher rate taxpayer.  The same percentage is applied to £21,100 fuel rather than £564 for van fuel and you start to see why van vs. car really does matter.

What’s more, it’s a question of guilty until proven innocent.

All vehicles are cars unless they are a motorbike, an invalid carriage, not suitable for private use (almost impossible) OR they are a van.  So far so good, but…..

  • A van must be built primarily to carry  goods
  • The fact that a vehicle is described as commercial is not sufficient to make it a van
  • Any design features or marketing that promotes the vehicle as multi-purpose can undermine its status as a van
  • Side windows behind the driver’s seat probably make it a car, especially if it is capable of being fitted with seats – whether they are actually fitted or not
  • The purpose of the vehicle’s construction outweighs what you are actually using it for
  • HMRC states that luxury off-roaders used in towns are cars, together with the Land Rover Defender Station Wagon

Where there is more of a grey area is “double cabs” – which do have seats, windows and doors behind the driver’s front row.  To qualify as a van the payload weight needs to be greater than 1 tonne plus HMRC have set out specific guidelines on how to calculate payload even including a 45 kg allowance for the roofs that some pick-ups come with.  Each double-cab is judged on its own merits and HMRC keeps a naughty list of all the vehicles that don’t qualify (along with those that do, of course).

I always encourage my clients to discuss their plans with me BEFORE they commit to spending their hard-earned cash – then they can make that decision with the full facts about what it is going to cost them both in cash and in tax.  If you would like to talk through your plans, please get in touch.


About the Author
Carolyn Burchell trained with the UK’s top firm of accountants, qualifying as a Chartered Accountant in 1996. Carolyn moved into industry in 1997 working on a number of commercial projects and managing Treasury and Credit functions before taking a career break to have a family. In 2009, Carolyn decided to enter into the stringent Chartered Institute of Taxation examination programme, qualifying as a Chartered Tax Adviser in 2012.

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