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HMRC have put the brakes on the favourable tax treatment of double-cab pickup trucks

Updated: Feb 22




EDIT: Please read our updated article - written after HMRC backtracked on the announcement detailed below.


If you were thinking of buying a double-cab pick-up, you might want to have a rethink or buy sooner than you had originally planned.

 

This month HMRC announced that from 1 July 2024 major changes relating to the tax treatment of double-cab pick-up trucks will come into effect.  This change relates to capital allowances (the allowance against corporation tax for companies or income tax for the self-employed) and car benefit rules for employees with a company vehicle.  From July these will be treated as cars for tax purposes, rather than being treated as commercial vehicles, as many of them now are.  For now, it appears the VAT treatment has not changed, but this may well follow to align the treatment across all the taxes.

 

HMRC have rewritten the relevant sections of both their Employment Income Manual and Capital Allowance Manual to clarify that from 1 July 2024, they will no longer exclude double cab pickups from the definition of car because, in their view, where no predominant suitability for the carriage of goods, rather than passengers, can be identified, the default position should be that they are cars.

HMRC are anticipating that most double-cab pickups, if not all of them, will be classified as cars for both capital allowance and employee benefit purposes.

Why does it matter if it is treated as a car or commercial vehicle?

 

The differentiation between a car and commercial vehicle is really important as it can make a big difference to the tax you might pay.

 

For capital allowance purposes : 

Current position              

If the pickup is classed as commercial vehicle, it will normally attract the 100% Annual Investment Allowance or, if it is purchased new by a limited company, 100% full expensing capital allowances.

From July 2024                

We anticipate that all non-electric double-cab pickups will have emissions over 50g/km, which will mean that only a 6% writing down allowance will be available. 

New and unused electric vehicles with zero emissions currently attract a 100% First Year Allowance

                                                               

For the benefit in kind charge as a company vehicle:

 

Current position             

If the pickup is classed as commercial vehicle, the benefit is calculated on a flat rate benefit , which typically gives a lower taxable value.  No taxable benefit arises in respect of a van where there is

insignificant private use.

From July 2024                

Benefits on company cars are taxed according to their list price and carbon dioxide emissions, which usually gives a higher taxable benefit. You will pay tax if you or your family use a company car privately,

even if this is just for commuting.

 

What this means in numbers

 

Currently a double-cab pickup will generally attract a 100% allowance in year one.  As a “car” this reduces to just 6%, i.e. £2,400 in year one, with annual allowances of 6% thereafter on a reducing balance basis.

 

The change could see the benefit in kind rising from around £4,500 for a “van” with fuel (or nil if there is insignificant private use) to over £25,000 for a “car”.  As a higher rate taxpayer, at 40% this gives an annual tax charge of £10,000.  Examples of other potential other unwelcome tax effects are loss of personal allowance giving an effective tax rate of 60%, the High Income Child Benefit charge, or pushing income into the 45% additional rate bracket including the loss of the savings allowance.

 

Employers will also see a corresponding increase of 13.8% on their employer’s National Insurance contributions.

 

Is there any good news?


At least there is some good news as there are transitional rules for those already owning these vehicles.


For capital allowances purposes, where expenditure is incurred on a double-cab pick-up on or after 1 July 2024, but before 1 January 2025, the vehicle will be treated as a commercial vehicle, provided that both of these conditions are met: 


·         The contract was entered into before 1 July 2024.

·         It has a payload of one tonne or more  

 

For employee benefits in kind purposes, where employers have purchased, leased, or ordered a double-cab pick-up before 1 July 2024, employers would then be able to rely on HMRC’s previous treatment until which of these dates occurs first; that of the disposal, the lease expires, or 5 April 2028.


Please get in touch with us to discuss how this is going to affect you.

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