HMRC does a U-turn on double cab pick-ups

Double cab pick-ups are popular vehicles in company fleets. Essentially, these vehicles are pick-up trucks, but they have a cabin with two rows of seats and four doors. This means they work well as company and family cars, as well as for transporting items.

It’s this dual nature that led HMRC to review the tax rules relating to these vehicles. Guidance on a new set of rules went live on 12th February 2024. This has now been archived because HMRC withdrew the proposed new rules on 19th February.

In this post, we look at how the government U-turn happened and what it means for you.

What were the proposed rule changes for double cab pick-ups?

Currently, for VAT purposes, HMRC classes double cab pick-ups over one tonne as a van. Vehicles under a tonne are classed as a car.

However, a recent court case threw doubt on whether this test was adequate. In 2020, a court ruled that Coca-Cola’s Vauxhall Vivaros and VW Transporter T5 Kombis were in fact cars, not vans.

This was one factor that led HMRC to announce that, from 1st July 2024, ‘most if not all’ double cab pick-ups would be classed as cars. This was ‘because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.’

What the changes would have meant businesses and employees

When HMRC defines a vehicle as a van rather than a car, it also has implications for income tax and benefits in kind.

Let’s take the example of a £40,000 double cab pick-up with CO2 emissions of 160km/g. As you can see from the table below, the reclassification of the vehicle as a car would have significantly increased the benefit in kind charges.

The change would also increased the Class 1A National Insurance paid by the employer.

Why the U-turn on double cab pick-ups?

HMRC had announced transitional arrangements. Essentially vehicles ordered, leased or bought before 1st July would have been subject to the old rules. Despite this, farmers and the motoring industry vigorously protested the changes.

A joint update from HMRC and the Treasury explained that it had decided to listen. The update says:

The government has acknowledged that the 2020 [Coca-Cola] court decision and resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.

As a result, the old rules relating to double cab pick-ups will be reinstated. Government has announced it will legislate to ensure that these vehicles continue to be treated as goods vehicles when they have a payload of over one tonne.

Next steps for company fleets

If you want to provide employees with double cab pick-ups, then it will remain an economical option if the vehicles are over one tonne.

That said, for the future, you may wish to reconsider what kinds of vehicle you provide. Currently, there are significant tax breaks available for electric vehicles. If you’d like more advice on making your company fleet tax efficient, talk to one of our accountants today.