Double cab pick ups to be classed as cars from 1 July 2024

The UK tax authorities have revealed plans to close the loophole that allows double cab pick up trucks with a payload of greater than one tonne, to be taxed as a van rather than as a car.

For the last twenty years, private individuals have been able to run pick ups as company cars and pay significantly less tax on the benefit in kind, than if they were a regular saloon, hatchback or SUV.  However, in note EIM23151 released on 12 February 2024, HMRC signalled its intention to rescind the tax break on all new pick ups ‘purchased, leased or ordered’ from 1 July 2024.

HMRC stated

‘From 1 July 2024, HMRC will no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes,’ the paper says. ‘This VAT approach for double cab pick-ups differentiated based on payload, with anything under one tonne classified as a car, and anything a tonne and over as a van. This rule was replicated as a pragmatic way of resolving the primary suitability and classification of double cab pick-ups.’

What should I do if I’m thinking of buying a double cab?

As long as the purchase or lease is made before the 1 July 2024 deadline, you will still be able to take advantage of the lower rate until 5 April 2028.  Alternatively, choose a single cab pick up which is considered ‘of a construction primarily suited for the conveyance of goods or burden.’

What happens next?

CAR magazine predicts that the UK’s pick up market will undergo significant change in the years ahead. It is likely that sales of double cab pick ups will balloon in the run up to the 1 July 2024 tax switchover, and then fall back potentially dramatically, as the tax advantages of running a double cab as a company car disappear.

Source https://www.carmagazine.co.uk/car-news/motoring-issues/pickup-truck-uk-car-tax-bill-benefit-changes-july-2024/     

Transitional arrangements

Transitional arrangements will apply for employers that have purchased, leased, or ordered a double cab pick up before 1 July 2024, whereby they will be able to rely upon the previous treatment until the earlier of the disposal, lease expiry, or 5 April 2028, which ever is sooner.  The position prior to 1 July 2024 remains unchanged as outlined at EIM23150.

The following examples all relate to double cab pick ups made available to employees, that HMRC says are not of a construction primarily suited for the conveyance of goods or burden:

Example 1 – Employer A purchased a double cab pick up on 14 September 2024.  As purchases on or after 1 July 2024 would be subject to the new rules, in this example the vehicle would be classified as a car and a car benefit charge would arise.

Example 2 – Employer B leased a double cab pick up on 10 April 2024.  As this was leased before 1 July 2024, the previous rules continue to apply for Employer B until the earlier of the lease expiry, or 5 April 2028.

Example 3 – Employer C purchased a double cab pick up on 10 July 2023.  This was subsequently traded in on 1 November 2024 for another double cab pick up. The previous rules apply to the first vehicle for Employer C until the trade in point on 1 November 2024.  As the new double cab pick up was purchased after 1 July 2024, it will represent a car under the new rules and a car benefit charge would arise.

Example 4 – Employer D placed an order for a double cab pick up on 5 January 2024, but this was not available to the employer until 2 September 2024.  As the agreement was entered into before 1 July 2024, the previous rules continue to apply for Employer D until the earlier of the disposal, lease expiry or 5 April 2028, whichever is sooner.

If you have any questions or queries about how this may affect you and or your business, please get in touch with your Swindells partner who will be able to advise you further.