Changes to the tax treatment of double cab pick-ups
Double cab pick-ups no longer treated as commercial vehicles from April 2025
Following the Autumn Budget 2024, double cab pick-up (DCPU) vehicles will once again be classified as cars for tax purposes. The decision was previously reversed in February 2024 following backlash from the motor industry.
Certain types of crew cab vehicles are classed as a ‘van’ rather than ‘cars’ for income tax and national insurance purposes. Over the years, there has been a number of discussions and court cases with HMRC surrounding the classification of what ‘van’ actually means.
In February this year (2024), the government looked to treat DCPUs as company cars, however, following concerns raised from the farming sector and motoring industry performed a U-turn.
In the Autumn Budget 2024…
“The government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for certain tax purposes. From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits.”
What are the changes?
From 1 April 2025 for corporation, and 6 April 2025 for income tax, DCPUs with a payload of one tonne or more will be treated as cars for the purposes of capital allowances, benefits in kind (BIK) and some deductions from business profits. This reclassification means that drivers will be liable to a much higher BIK tax, depending on the vehicle specifications.
The existing capital allowances treatment will apply to those who purchase double cab pickups before April 2025.
Furthermore, the transitional BIK arrangements will apply to employers that have purchased, leased, or ordered a double cab pick-up before 6 April 2025. In this case, they will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.
What about the VAT treatment of DCPUs?
[Article updated 6 December 2024 to include detail of VAT treatment.]
We have since learned that the VAT treatment of DCPUs has not changed. DCPUs are still subject to the standard 20 per cent rate of VAT but are still deemed to be commercial vehicles for VAT purposes if they have a payload in excess of 1 tonne. That means that businesses remain able to recover the VAT on their purchase and running costs subject to normal VAT conditions.
The next steps…
For businesses in construction, farming and other industries where pickups are used we recommend reviewing their current fleet and assessing the impact of the changes taking place in the new tax year.
As the new regulations do not come into effect before April 2025, we would advise to our clients to consider replacing some of the existing vehicles for DCPUs or consider taking out new DCPU leases before the end of the qualifying period to extend the beneficial tax treatment for up to 4 years.
In February 2024 guidance stated...
What were the proposed changes?
On 12 February 2024 HMRC updated its guidance on the tax treatment of double cab pick-ups. The guidance stated that from 1 July 2024, all double cabs with a payload of 1 tonne or more would be treated as cars rather than goods vehicles for benefit in kind (BIK) purposes.
The new rules were due to apply to all double cab pick-ups ordered after 1 July 2024 – any vehicles already on fleet or ordered before July would still be subject to the existing classification until April 2028.
The policy U-turn:
Following backlash from farmers and the motor industry, including the feedback from the Society of Motor Manufacturers and Traders (SMMT), the government has decided to withdraw the new guidance just over a week after the initial announcement. On 19 February 2024 updated guidance was posted on HMRC’s website. HMRC concluded that the proposed change from July 2024 would impact businesses and individuals in a way that is not consistent with the government’s wider aims.
Consequently, double cab pick-ups will continue to be treated as goods vehicles rather than cars, and businesses and individuals can continue to benefit from the historic tax treatment.
Nigel Huddleston, Financial Secretary to the Treasury, said: “We will change the law at the next available Finance Bill in order to avoid tax outcomes that could inadvertently harm farmers, van drivers and the UK’s economy.”
Concerning the tax year 2023/24 vans provided to employees for private use will attract a flat rate benefit in kind (BIK) of £3,960 (reduced to zero if it is classed as a zero emissions vehicle). In addition, a separate van fuel charge applies if the employer meets the cost of fuel for private travel. This is set at £757 for 2023/24 which is then subject to tax for both the employer and employee.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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We specialise in helping businesses in construction, farming, and other industries navigate their accounts and tax obligations with confidence. If you’d like to explore how these changes could impact your business and learn how our services can support you, please get in touch to discuss your needs further.
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