HMRC’s pick-up truck tax change U-turn

Company Cars, News,

Just a week after announcing a tax-rule change that would have caused drivers of pick-ups a significant cost increase, HMRC has performed a dramatic about turn and cancelled their decision. Apparently the response to the announcement made clear the impact it would have made to the farmers, trades and motor industry, that prior research had overlooked.

The background…

A Court of Appeal ruling in 2020 decided that crew vans with a payload below a tonne failed to qualify as goods vehicles and were therefore cars and should be classified accordingly for benefit in kind purposes. Prior to that point, HMRC had deemed trucks with a payload in excess of one tonne to be closer to commercial vehicles than private cars. 

The motor industry had taken advantage of the increased demand for these vehicles as a result of the perceived loophole that allowed them to be classed as commercial vehicles, and they’ve become ever more powerful, luxurious and well appointed, further increasing their appeal.

We have always felt this to be a very grey area, and events of the last week have highlighted that!

What each announcement said…

Monday 12th February 2024

HMRC announced that these vehicles would in future be classed as cars, and attract significantly increased Benefit in Kind rates. Double-cab pick-up owners would most likely have faced the highest 37% rate of Benefit in Kind tax due to the high CO2 emissions of most pick-up trucks.

There was a deemed grace period, with any bought or ordered before 1st July 2024 being classified on the existing system, while those ordered or purchased after that point would be classed as cars, and face increased tax bills.

HMRC argued that these pick-ups are now used more often as private cars than working trucks.

Understandably, the main users of these vehicles, being farmers, self employed trades who need what are classed as ‘hardy workhorses’, were unimpressed. Many such businesses have a legitimate need for a truck that can carry several workers and a high amount of equipment that may be unsuited to a larger vehicle. 

The motor industry too was very vocal, as the initial surge in demand in advance of the 1st July was likely to be followed by a corresponding drastic decline after that point. 

Monday 19th February 2024

HMRC announced that they were rescinding the rule change, and that double cabs would continue to be classed as commercial vehicles. Owners will continue to be charged the same flat rate of Benefit in Kind for all commercial vehicles rather than being taxed on the emissions based system used for passenger cars.

For the avoidance of doubt, double cab pick-ups with payloads beneath one tonne will continue to be classed as passenger cars.

Our view…

This is likely to be a subject that HMRC return to later, as suggested by a statement by Nigel Huddleston, the Treasury financial secretary ‘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.’

We will of course keep our eyes open for future developments, and keep you updated.

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