From 1 July 2024, HMRC is going to reclassify double cab pick-ups as ‘cars’ for employment benefit and capital allowance purposes. Pick-ups acquired or ordered before 1 July will benefit from a transition period.
What is a double cab pick-up?
Typically, a double cab pick-up has:
• A front passenger cab containing two rows of seats capable of seating three or four passengers, plus the driver.
• Two or four doors in addition to any rear door that are capable of being opened independently.
• A load-bearing pickup area behind the cab.
Previous treatment
• Historically, for the purposes of Benefits In Kind (BIKs) and Capital allowance purpose HMRC have interpreted the meaning of ‘car’ in line with the definition used for VAT purposes.
• This meant that HMRC accepted double cab pick-ups with a payload of 1,000kg or more were not cars. HMRC also notes that two door versions are normally accepted to be vans.
New policy from July 2024
HMRC have revised both their Employment Income Manual and Capital Allowance Manual to state that from 1 July 2024, the meaning of ‘car’ will no longer be interpreted in line with the definition used for VAT purposes in respect of double cab pick-ups.
After 1 July 2024, HMRC’s classification of double cab pick-ups for BIK and capital allowance purposes will be based on an assessment of the specific vehicle to determine whether its construction is primarily suited for the conveyance of goods or burden of any description.
HMRC anticipate that, most, if not all, double cab pickups will be classified as cars for benefit charge and capital allowance purposes as they consider that such vehicles are typically equally suited to convey passengers and goods and have no predominant suitability.
Transition:
BIKs
Where employers have purchased, leased, or ordered a double cab pick-up before 1 July 2024, transitional arrangements will apply. In such cases, employers can rely upon HMRC’s previous treatment until the earlier of disposal, lease expiry, or 5 April 2028.
Capital allowances
Where expenditure is incurred on a double cab pick-up on or after 1 July 2024, and before 1 January 2025, the vehicle will not be treated as a car, provided that:
• The contract was entered into before 1 July 2024.
• It has a payload of one tonne or more
Why does classification as a ‘car’ matter?
For BIKs purposes, the method of calculating the taxable value of an employer-provided vehicle differs depending on whether the vehicle in question is a car or van.
• Company cars are taxed according to their list price and carbon dioxide emissions.
• Vans are taxed based on a flat rate benefit value, which typically gives a lower taxable value.
The rules surrounding private use also differ; no taxable benefit arises in respect of a van where there is insignificant private use.
For capital allowance purposes:
• Vehicles which are not cars will usually attract the 100% Annual Investment Allowance, or, if the vehicle is new and purchased by a company, 100% Full expensing capital allowances.
• With the exception of zero-emission vehicles, cars generally attract lower rates of allowances.