The Autumn Budget 2024 was a significant moment for drivers of double-cab pickups (DCPUs). With HMRC recently releasing new guidance, a transformation in how these vehicles are classified for tax purposes is on the horizon ...
Most double-cab pickups are predicted to qualify as cars under this new assessment method!
Set to take effect on the 6th of April 2025, this change influences the financial implications for companies and employees alike, especially those who use these popular vehicles for both work and leisure.
What exactly constitutes a double-cab pickup?
A row of seats situated behind the driver that can accommodate approximately four passengers alongside the driver
Four independently operable doors
An uncovered pickup area located behind the passenger cab
Traditionally, the classification of a vehicle as a car or a van has had significant tax repercussions.
For example, if you're allowed to use a vehicle for private purposes, the benefit-in-kind (BIK) cost is substantially higher when the vehicle is defined as a car rather than a van. Thus, understanding the new rules surrounding double-cab pickups is crucial, particularly if you're thinking of acquiring one after April 2025.
Since 2002, the tax treatment for double-cab pickups has been tied to their VAT classification. If a DCPU possessed a payload of 1 tonne or more, it was generally accepted as a van for BIK purposes. This simple approach benefitted many, contributing to the steady rise in the popularity of these vehicles. However, a pivotal court case involving Coca-Cola's crew-cab vehicles brought considerable complexity to the situation.
The Court of Appeal ruled that these vehicles should be classified as cars instead of vans, given they lacked a primary purpose of carrying goods. This decision revealed a disparity in the treatment of crew cabs versus DCPUs, both capable of carrying more passengers than traditional vans.
"Now, there's a new approach!"
From 6 April 2025 onwards, HMRC will apply a new tax assessment method that requires employers to evaluate whether a double-cab pickup is primarily suited for carrying passengers or goods. To qualify as a van, it must have a primary suitability for transporting loads. Conversely, if it is primarily suitable for carrying passengers - or if no primary suitability is evident at all - it will now be categorised as a car. This assessment hinges on the vehicle's configuration when first provided to an employee, including any modifications made post-factory.
There's good news if you currently operate a DCPU as transitional arrangements have been established to safeguard existing users from immediate tax repercussions. Employees using double-cab pickups purchased, leased, or ordered before the 5th of April 2025 can still classify their vehicles with a payload exceeding one tonne as vans. This classification remains valid until the vehicle is sold or until the 5th of April 2029.
Besides Benefit In Kind implications, the changes will also have repercussions in areas concerning capital allowances and business profits. Starting from the 1st of April 2025 for Corporation Tax, and the 6th of April 2025 for Income Tax, all DCPUs will be assessed based on their primary suitability rather than solely their payload limits.
Most DCPUs are predicted to qualify as cars under this new method, meaning that the previously available 100% Annual Investment Allowance claims will no longer be an option. Furthermore, given that DCPUs generally exceed CO2 emissions of 50g/km, writing down allowances will be restricted to a diminished rate of 6%.
"It is essential to note that the 'payload test' will not be entirely obsolete!"
For VAT purposes, double-cab pickups could still be qualified as cars for most purposes, leaving some discrepancies and a layered classification system in place. The changes surrounding double-cab pickups represent a significant shift in how these vehicles will be taxed in the UK.
Whether you're on the cusp of buying a new DCPU or simply trying to navigate existing regulations, understanding this pivotal change is paramount in ensuring you're prepared for the future tax landscape of double-cab pickups.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about double-cab pickups and how it will affect your benefit in kind assessments, it could be a great idea to call me on 01908 774320 and let's see how I can help.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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