The Court of Appeal has issued a ruling which means that some crewcab vans are to be treated as cars for benefit-in-kind purposes. What was the key finding and what should you warn clients of?
In Payne & Ors v HMRC  EWCA Civ 889 (see Follow up), the Court of Appeal issued a judgment that could have expensive consequences for thousands of employers and employees, including your clients. The case examined whether three modified crewcab vehicles should be treated as vans or cars for benefit-in-kind (BIK) purposes.
Each van was based on a panel design, similar to a Transit or Vivaro. However, the discrepancy arose due to a modification meaning a second row of seats was installed behind the driver. Under the benefits code, for a vehicle to be a “van” it must be a goods vehicle, that is one “of a construction primarily suited for the conveyence of goods or burden”. The court made two significant observations:
- the term “of a construction” is applied after any modifications, so a van that has been converted, as in the vehicles in this case, can become a car; and
- “primarily suited” should be taken to mean first and foremost, i.e. the vehicle must clearly be more suitable for goods.
One of the vehicles considered was held by the First-tier Tribunal to be a van by a very narrow margin, owing to the second row of seats having a gap in the middle. The Court of Appeal’s interpretation means that this vehicle has also now been reclassified as a car.
This decision only applies for BIK purposes. It is unclear whether HMRC will seek to challenge the classifications of vans for other purposes, e.g. VAT, but we will keep you informed of any developments.
If you have clients that provide such vehicles to employees, warn them about the decision, and advise that they may wish to consider alternative vehicles going forward. In the meantime, the vehicles will need to be reported on the P11D using the car rules.
To qualify as a van, the vehicle must be ‘clearly more suitable’ for goods than passengers. Warn clients that if they have multi-purpose vehicles, they will have to report them on the P11D as cars, not vans.