From April 2025, most double cab pick-ups will be treated as cars, not vans, for direct tax purposes, potentially meaning increased tax bills for employers, employees and businesses.
Currently, HMRC will treat a DCPU that has a payload of one tonne or more as a van for the following direct tax purposes:
- benefit-in-kind (BIK) calculations;
- capital allowances; and
- deductions from business profits for:
- hire costs where profits are calculated on the accruals basis; and
- capital expenditure where the cash basis is used.
In so doing, HMRC is following the definitions of ‘car’ and ‘van’ that apply for VAT.
HMRC explains that a DCPU normally has:
- two rows of seats in a front passenger cab with space for the driver and at least four passengers;
- four doors that are capable of being opened independently; and
- an uncovered pickup area behind the passenger cab.
In a recent update to its guidance, HMRC says that references to DCPUs include “variants such as extended, extra, king and super cab pickups”.
HMRC’s revised position
At the Autumn Budget 2024, the government announced that HMRC will change its policy for DCPUs for direct tax purposes from:
- 1 April 2025 for corporation tax; and
- 6 April 2025 for income tax and national insurance contributions (NICs).
From that date, HMRC will treat a vehicle as a van if the construction of the vehicle at the time it was made means that it is primarily suited for the conveyance of goods. No changes are being made for VAT purposes.
HMRC says that, as a result of applying its revised policy, most DCPUs are expected to be treated as cars “because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability”.
Tax liabilities may be increased, or tax relief given at a slower rate, where a vehicle is classified as a car rather than a van.
Transitional arrangements
If a contract is entered into before the change and the expenditure is incurred on or after that date, but before 1 October 2025, the current guidance will still apply.
Example
A Limited enters into a contract on 1 January 2025 to purchase a double cab pick-up (payload 1,075kg).The total cost of the vehicle is £35,000. They pay a 10% deposit of £3,500 on 1 January 2025, the day they sign the contract.
The vehicle is available for collection on 1 June 2025 and the company pays the balance of £31,500 on collection. The deposit of £3,500 is incurred on 1 January 2025, before the commencement of the revised interpretation for double cab pick-ups. Accordingly, this will be expenditure incurred on the provision of goods vehicle and the company may be entitled to claim annual investment allowance or full expensing.
The balance of £31,500 is incurred 1 June 2025, which is on or after 1 April 2025, when the revised interpretation for double cab pick-ups applies for companies. However, this expenditure has been incurred in respect of a contract entered into before 1 April 2025 and, as a result, the pre 1 April 2025 interpretation will apply.
If you would like to discuss how this may impact you going forward, please give a member of our team a call today.