BUSINESSES that use double cab pickups could face a significant increase in their tax bills from July, according to tax experts at Hall Morrice.
HMRC will treat most double cab pickups as cars rather than vans for tax purposes later this year.
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The firm is advising its clients to review their vehicle fleets and prepare for the changes that will come into effect on 1 July.
Under the current system, HMRC applies the same approach as is used for VAT purposes to determine the classification of double-cab pickups for the benefit in kind (BIK) rules. However, from July onwards, a new two-part test will be used to assess whether these vehicles should be considered cars or vans for tax purposes. This test will consider the vehicle’s construction and any modifications made to it and whether they are primarily suited for the carriage of people or of goods.
Chris Colville, tax director at Hall Morrice, said: “This is a significant change that will affect many businesses across the North East of Scotland, especially those in the rural agricultural, construction and energy sectors that rely on double cab pickups for their operations. These vehicles have been popular because they offer both practicality and tax efficiency, but from 1 July, they may lose their favourable tax treatment and therefore become much more expensive to run.”
He added: “The new rules will apply to both new and existing vehicles. Businesses will need to assess the impact of the change on their cash flow and budget accordingly. They may also want to consider alternative options, such as switching to single cab pickups, which may still qualify as vans, or looking into electric vehicles.”
Chris continued: “HMRC has been challenging the status of these vehicles for some time, arguing that they may not be used primarily for carrying goods, but rather for transporting passengers. They have issued guidance on how to determine whether a double cab pickup is a car or a van, based on factors such as the payload, the number of seats, the size of the load area, and the modifications made to the vehicle.
However, the guidance is still not very clear and leaves room for interpretation, so it will be down to employers and their advisors to review the position on a case-by-case basis.”
Chris outlines some examples of how the change would affect businesses that use double cab pickups.
“Based on 2023/24 figures, for a basic rate taxpayer the annual BIK Tax on a double cab pickup with a list price of £30,000 and CO2 emissions of 200g/km would increase from £792 (£832 if you’re a Scottish 21% taxpayer) to £2,220 (£2,331 if you’re a Scottish 21% taxpayer). For a higher rate taxpayer, the annual BIK tax would increase from £1,584 (£1,663 for Scottish 42% taxpayers) to £4,440 (£4,662 for Scottish 42% taxpayers). In either case, the employer’s Class 1A National Insurance contribution would increase from £546 to £1,532.
HMRC has quietly closed this tax loophole and it may catch many North East businesses by surprise. These are substantial increases that will have a significant impact on the bottom line of many businesses.”
Businesses can contact Hall Morrice for advice on how to deal with the new tax rules and plan ahead. Chris Colville concludes, “We have a team of tax experts who can help businesses understand the implications of the change and advise them on the best course of action. We can also help them with any disputes or appeals that may arise with HMRC. We are here to support our clients and help them navigate the complex and ever-changing tax landscape.”
Hall Morrice is a well-established independent accountancy firm based in Aberdeen and Fraserburgh, known for providing comprehensive accountancy services to a wide range of businesses and sectors. With a commitment to excellence and client satisfaction, Hall Morrice has built a strong reputation. www.hall-morrice.co.uk.
