The question of whether something is a car or a van for tax purposes is for many vehicles a fairly straightforward one. However, for dual purpose vehicles such as crew cabs, it can be surprisingly complex and the decision has significant consequences for tax when an employee is provided with a vehicle which they are allowed to use privately. Private use of a company vehicle creates a taxable benefit in kind, and the amount of that benefit depends on the nature of the vehicle. If the vehicle is classed as a car, then the tax liability for both employer and employee will be significantly greater than if it is classed as a van.

For benefit in kind purposes, a van is a vehicle which is primarily constructed to carry goods or burden. That the vehicle might be considered a van for other purposes such as road tax or VAT, is not relevant as the test for the benefit in kind rules is very specific.

The issue of whether or not crew-cab vehicles, which have a second row of seats behind the driver and can carry a larger number of passengers than a simple transit van for example, are cars or vans for benefit in kind purposes has been considered at length in a long-running case involving Coca Cola. Coca Cola argued that the crew cab vehicles used by their staff were vans, HMRC that they were cars.

After a series of hearings spanning 2017 to 2020, the case was finally decided in HMRC’s favour by the Court of Appeal in 2020. The Court held that all three vehicles– a Vauxhall Vivaro and two types of VW Kombi –should be treated for benefit in kind purposes as cars and not vans. Each of the vehicles had seats behind the driver and had been modified by Coca Cola for their specific use. But after considering the construction of each vehicle carefully, the Court felt that all the vehicles fell short of the definition to be classed as vans. (Earlier rulings had only held the Kombi vehicles to be classified as cars.)

Since all three of the vehicles considered made substantial provision for passengers, the Court considered that their predominant purpose could no longer be considered to be that of carrying goods. In fact, the Court noted that it might be possible for such a vehicle to have no primary purpose. Therefore, it was necessary for benefit in kind purposes to treat the vehicles as cars, resulting in a much higher tax charge.

After the ruling, Coca Cola sought leave to appeal to the Supreme Court, but this was refused last year and HMRC is now reminding employers of the importance of ensuing that they have classified their vehicles correctly for 2021/22 as the deadline of 6 July 2022 for reporting benefits on a P11D approaches.