On January 12, 2024, HM Revenue & Customs (HMRC) announced a significant alteration to VAT rules regarding the classification of vehicles as cars for benefit-in-kind (BIK) and capital allowances purposes, effective from July 1, 2024.
However, on February 19, 2024, HMRC reversed this decision, retracting the previously proposed guidance.
A double cab pickups classed as cars?
Previously, a vehicle was exempt from being classified as a car for VAT if it had a payload exceeding one tonne (as per VAT Notice 700/57). HMRC cited the Court of Appeal’s ruling in Payne & Ors v HMRC [2020] EWCA Civ 889 as the reason for reconsidering this approach concerning BIK and capital allowances.
The new proposal aimed to classify a vehicle as not being a car if it was primarily designed for transporting goods, potentially resulting in most double cab pickups being reclassified as cars. Transitional measures were planned to maintain the previous treatment for vehicles acquired or leased before July 1, 2024.
However, following feedback from farmers and the automotive industry, double cab pickups will continue to be considered goods vehicles if they have a payload of one tonne or more. HMRC has confirmed this adjustment.
Future Finance Bills will incorporate legislation to ensure that double cab pickups with a payload of one tonne or more retain their classification as goods vehicles for tax purposes.
For further information on what this U-Turn means for your business, contact us today.
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