Monthly Archives: March 2015

Tax, BIK & VAT Position for crew & window commercial vehicles/vans with rear seats

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Crew/Window Vans

Don’t get caught out taking a van with rear seats and windows, this article will help you understand the different rules and regulations.

VED

For VED purposes, vehicle classification is determined by The Motor Vehicles (Type Approval for Goods Vehicles) (Great Britain) (Amendment) Regulations 2009, this drives the VED calculation. Category M1: Vehicles with at least four wheels designed and constructed for the carriage of passengers and comprising no more than eight seats in addition to the driver’s seat. This VED calculation is CO2driven. Category N1: Motor vehicles with at least four wheels designed and constructed for the carriage of goods Category N1: Vehicles designed and constructed for the carriage of goods and having a maximum mass not exceeding 3.5 tonnes. This VED calculation is driven by the engine if Euro 4 or 5 this will equate to £140 per year anything below is £225 .

VAT

EIM 23100 states that Vehicle Excise Duty and VAT legislation are both different to income tax legislation, so the same vehicle can be treated differently by the different agencies. For instance, VED is based on type approval at the time the vehicle is first registered, whereas VAT and the tax/NICs regimes consider the nature of the vehicle at the time of the transaction or in the relevant tax year. For VAT purposes the legal definition of a motor car is contained in the Value Added Tax (Cars) Order 1992, Statutory Instrument 1992/3122 and VIT50300. The current definition is: A “Motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either:

  • (a) is constructed or adapted solely or mainly for the carriage of passengers;
  • or (b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows; but does not include— vehicles constructed to carry a payload with a maximum gross weight of one tonne or more.

There are vehicles which clearly do not fit comfortably within the first part of the definition of a motor car. This is because they are not “solely or mainly for the carriage of passengers”. Below is HMRC’s list of car derived vans and combi vans for VAT purposes which provide clarity on HMRC’s stance on such vehicles for VAT purposes and could be used by Pricing. http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=t rue&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_PROD_010443&prop ertyType=document. BIK & NI For income tax purposes, the definition of a car is held within Section 115(1) ITEPA 2003 and EIM23110. This definition works by exception: every mechanically propelled road vehicle is a “car” unless it is:

  •  (i) a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description),
  • (ii) a motor cycle (as defined in Section 185 Road Traffic Act 1988),
  • (iii) an invalid carriage (also as defined in that Act),
  • (iv) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

Under exclusion 1 above, the statutory test is a test of construction, not use. The fact that the manufacturer or dealer describes the vehicle as a “commercial vehicle” is not conclusive. If a vehicle is designed and marketed as a multi-purpose vehicle, it is unlikely to fall within this exception. There is specific guidance for double cab pick-ups which is contained within EIM 23150. From 2002/03, when deciding whether double cab pick-ups count as cars or vans, HMRC will interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes. This definition however only applies to double cab pickups, and not car derived vans or combi vans. There is further guidance on classification of multi-purpose vehicles contained within EIM23120, EIM23110, EIM23145 and EIM23115. Corporation Tax Capital Allowance definition. The rules for claiming capital allowances on cars changed for cars that were purchased on or after 1 April 2009 for Corporation Tax purposes and on or after 6 April 2009 for Income Tax purposes. Since 17 April 2002 certain new, very low CO2 emission cars, including electrically propelled cars, qualify for a 100% FYA. Definition of car for capital allowance purposes For capital allowance purposes, a car is any mechanically propelled road vehicle unless it is:

  • constructed in such a way that it is primarily suited for transporting goods of any sort;
  •  not commonly used or suitable for use as a private vehicle.

This means that vans and lorries are not considered to be cars, whereas motor homes are. However, certain vehicles such as driving school vehicles with dual control are not treated as cars for capital allowance purposes although they may be classed as cars for other tax rules. For purchases on or after 1/6 April 2009 motorcycles are not cars for capital allowance purposes, though they were before that date. If a vehicle is not a car, the special rules for cars do not apply to it and the other allowances in this guide may be available. Please note that this definition of a car for capital allowances may not be the same as that used for other aspects of your Income Tax or Corporation Tax, or for other taxes such as VAT, or by other government departments. Capital allowances on cars bought on or after 1/6 April 2009 The capital allowances you can claim on your cars are based on CO2 emissions, which are shown on the car’s V5 certificate. Check your car’s CO2 emissions on the Vehicle Certification Agency (VCA) website (Opens new window). If your car does not have an emissions figure but it was first registered after 1 March 2001 then the expenditure is allocated to the special rate pool, or a single asset pool if there is non-business use. NOTE – This article should be used a a guide, we always recommend that you take professional advice on matters surrounding financial legislation.