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WHEN IS A COMPANY VAN NOT A VAN?
When is a Company Van Not a Van?
When it’s classed as a car!
A company car is always taxed as a benefit in kind. However, with a company van the tax you pay is generally speaking much lower than on a company car, and sometimes it won’t be taxed as a benefit at all – such as if the van is only used privately for commuting to and from work. Plus, a business can recover VAT on the purchase or sale of a van, which it isn’t possible to do with a car. Therefore if you want to keep your costs down, the key is to know when a company vehicle can be classed as a van, and when it is considered to be a car – and the distinction isn’t as simple as you’d first imagine.
Under employee benefit rules, a van is a vehicle constructed primarily for the conveyance of goods or burden of any description, not including people. A van must be designed to a maximum weight of 3,500kg, and must not have windows in its loading bay at the rear.
Car derived vans
The main confusion arises with what HMRC refer to as ‘car derived vans’ and combination vans. These are vehicles such as double-cab pick-ups, which have two rows of seats both with side windows, and then a loading bay at the rear. The distinction between whether these are classed as vans or cars lies in their payload – if they are constructed to carry one metric tonne or more then they can be considered a van.
If you’re uncertain whether a particular vehicle is classed as a company van or a company car for tax purposes, you can check its status on a list provided by HMRC (please note though that this list was last updated in May 2015 and changes may since have come into effect): click here.
Be warned that it is not just a van’s original construction but also its primary use which can have an effect on its favourable tax treatment – it must still be used sufficiently for business purposes. In a recent tax tribunal case, the judge agreed that a VW Kombi van that had been converted (so that it had two rows of seats for passengers) was a company car not a van. The judge decided that the primary construction of the Kombi van was not for the conveyance of goods alone, but rather that its purpose was for the conveyance of both goods and people equally. This therefore meant that the Kombi did not meet the requirement to be considered a van, and so for tax purposes it was a car. Note however that at this same tribunal, the judge decided that a Vauxhall Vivaro van, which was converted so that it had two rows of seats, was a van! Due to the uncertainties which have arisen as a result of this particular case, there have since been calls for HMRC to review their current policy and issue fresh guidelines as to what it now deems to be a car and what is a van.