At McDade Roberts we help a whole range of business owners with a whole range of vehicles. From bikes to tractors to high performance cars, we have seen them all. One question that pops up is whether HMRC will classify certain vehicles as a car or a van. Read on to find out.
There are several tax areas which rely on being able to determine whether a particular vehicle is classified as a car or a van:
- Benefits in kind, where car and fuel benefits are linked to a scale of CO2 emissions, whereas vans are on flat rates.
- Capital allowances, where vans qualify for annual investment allowance, whereas cars enter the main or special pools and qualify for writing down allowance only. Cars with qualifying emissions not more than 50 g/km are entitled to 100% first year allowance.
- VAT where input tax can be claimed on vans but not on cars (except in some very specific circumstances).
Car Benefit Definitions
Every mechanically propelled vehicle is a car, unless it is:
- a goods vehicle
- a motor cycle
- an invalid carriage
- a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used
A goods vehicle is defined as a vehicle of a construction primarily suited for the conveyance of goods or burden of any description (not people). A vehicle whose design weight exceeds 3,500kg is not a van, but a heavy goods vehicle.
Capital Allowances Definition
This is almost identical to the benefits definition. Hire cars, taxis and driving school instructor cars are specifically included in the definition of cars.
VAT Input Tax Recovery
VAT rules say that a car is any motor vehicle of a kind normally used on public roads. It must have three or more wheels and meet one of the following conditions:
- It must be constructed - or adapted - mainly for carrying passengers.
- It must have roofed accommodation behind the driver's seat. This must either be fitted with side windows already or be constructed - or adapted - so that side windows can be fitted.
In addition, the following are not cars for VAT purposes:
- vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
- caravans, ambulances and prison vans
- vehicles of three tonnes or more unladen weight
- special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles
- vehicles with a payload of one tonne or more
Problem Car-Derived Vans
These vehicles, from the outside, still maintain the appearance of a car. However, from the interior the vehicles have the appearance and functionality of a van – the rear seats and seatbelts have been removed along with their mountings, the rear area of the shell is fitted with a new floor panel to create a payload area and the vehicle's 'side windows' to the rear of the driver's seat are made opaque. Such vehicles will be classified as vans, but all the criteria are very strictly applied.
Vans with Rear Seats
Some vehicles look like vans and don't have windows in the sides behind the driver. But they do have additional seats for carrying passengers behind the front row of seats. They're sometimes known as combination vans or combi vans.
HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:
- It has a payload of more than one tonne after the extra seats have been added.
- The dedicated load area is larger than the passenger area. This means that the main use of the vehicle is for carrying goods rather than passengers.
If it meets either of these conditions then the vehicle is a commercial vehicle for VAT purposes and you can reclaim the input VAT if you follow the normal rules for reclaiming VAT.
HMRC has produced a list of car derived vans and vans with rear seats showing whether they're classed as a van (commercial vehicle) or a car for VAT purposes:
Check the HMRC list of car derived vans and combi vans
Who would have thought it was that complicated deciding if a vehicle was a car or a van! Remember that vehicle specifications change so the list above may not be up to date. If you're in any doubt you can contact the HMRC VAT Helpline (0300 200 3700) for guidance. For other queries about what you can and cannot claim when it comes to tax and VAT, give McDade Roberts a call. We will be happy to help.