Our client (an electrical engineer) recently asked us about the tax benefits of having a company van instead of a company car and then the conversation went on to the type of van he could buy and still enjoy the tax benefits.
So the conversation went a bit like this:
Q: I want a new car, should I get a company van instead as I heard that it is more tax advantageous? The company will pay for my fuel and I will use it to ferry my kids around as well as commuting to and from work. I’m considering either an Audi A4 150PS 2.0TDI or a van (not sure which van).
A: If you were to opt for the Audi, then there would be a taxable benefit in kind totaling £13,439 (inc Fuel benefit) – This would mean a tax bill of £2,688 (since you’re a 20% tax payer, but if you took enough dividends from the company so as to make you a 40% tax payer, then the tax bill would be £5,375. If you opted for the van (and fuel) then the taxable benefit would be £3,983 – meaning a tax bill of £796 (40%: £1,593) so if you went for a van then a tax saving of £1,892.
Q: Ok, what about a beefy double-cab pick up? will I still get to treat it as a van for tax?
A: There’s bit a lot of ambiguity over what’s a car vs. van, especially when we are talking about kombi van (with extra seats) and double – cab type pick ups. With Kombi vans (vans with extra row of seats and windows), HMRC has helpfully provided a list of vehicles they are prepared to accept as vans. If your vehicle isn’t on this list, then it will likely be classified as a car and attract the higher car tax benefit charge. For pickups, HMRC have a slightly different rule – HMRC do classify pick-ups as vans – as long as they have a manufacturer’s payload of 1 tonne (1000kg) or more (how much a vehicle can safely carry). Additionally, where a pick-up has a removable hard top, this is given a generic weight of 45kg and so you will need to deduct this 45kg off to get the gross payload.
So, if your pick-up that has a payload of 1010kg (say) with a removable hard top, this will be car under these definitions. So it’s important to choose your pick up wisely and ensure the one you select qualifies as a commercial vehicle.
Other things to consider:
- This advice also applies to second-hand vehicles.
- If you’re VAT-registered, you will also be able to reclaim at least some of the VAT back on the van (if you paid VAT on it) but you certainly won’t be able to on a car.
- If you are a sole trader or a partner in a partnership, there is no benefit in kind tax on single-cab and double-cab pick-ups.