Tax & Accounting News

End To Pick-Up Truck Confusion

13/07/2009

Pick-up truck drivers received some good news recently, after HM Revenue and Customs (HMRC) moved to end the confusion over whether they should be treated as cars or vans for tax purposes.

Previously, HMRC adopted two different rules for the tax treatment of double-cab pick-ups, charging directors and employees for benefits-in-kind as if it were a van, but only granting tax relief on the purchase cost as if it were a car.

The ‘car’ categorisation meant drivers of pick-up trucks potentially losing out as, under new Capital Allowances (CA) rules introduced in 2008, a car with CO2 emissions of 160g/km or more only attracts a tax deduction of 10% of its cost each year – so a business would only reclaim the full cost if it kept the vehicle for ten years. For lower-emission cars, a rate of 20% is applied and for the very small number of cars with CO2 emissions of less than 110g/km, 100% of the cost can be claimed in the first year. Crucially, all vans benefited from the 100% rate, regardless of their emissions.

This anomaly lead HMRC to conclude the same definition of a van should apply across all aspects of tax – for CAs, Benefits-in-Kind and VAT. A double-cab pick-up with a payload of one tonne or more is now accepted as a van for CA purposes, meaning the full tax relief will be available in one year, rather than ten.

The re-definition also applies retrospectively, so anyone who has bought a pick-up since April 2008 can claim for CAs at the rate applicable on their next accounts and tax return – and anyone who has already submitted a claim at a lower rate is entitled to amend it.