There have been several important tax decisions previously regarding the difference between vans and cars, but how do the different rules regarding electric vans affect their tax treatment?
Unlike company cars, if an electric company van is only used during working hours for work purposes, then the Benefit in Kind (BiK) charge is nil.
However, if the van is used by an employee outside of working hours for personal use, then the BiK charge changes, and employers are charged at the same rate they would pay for electric cars – 2 per cent.
The above ruling comes from HM Revenue & Customs (HMRC) who argue that once an electric van has personal use, it then becomes an electric car and not a “goods vehicle”, as defined by Section 115 ITEPA (Income Tax (Earnings and Pension) Act) 2003.
Many modern vans have been designed and are advertised as multipurpose vehicles to negotiate this HMRC judgement, and there are a number on the market that have crew cabs or “kombi” roles, that allow for passengers as well as goods.
This confusing situation has been tested many times, not least in the case of Payne, C Garbett, Coca-Cola European Partners GB Ltd v HMRC at the Court of Appeal on 20 July 2020.
In this case, HMRC was able to prove that the VW Transporter T5 Kombi and Vauxhall Vivaro vehicles provided by Coca-Cola to employees were not vans, and instead served the purpose of being a car.
Examples and cases such as this can make it difficult for companies to find the most tax-efficient fleet of vehicles and can make the choice of vans and cars more complicated.
If you are looking to purchase new vehicles for your business, it is important to seek expert advice. Contact us to find out more.
