When is a van a car? Coca-Cola goes head to head with HMRC to decide the matter

7 February 2018

Tax on company cars

For many decades HMRC and car manufacturers have played cat and mouse over the taxation of company vehicles when used privately by individuals. In fact it would not be an exaggeration to say that ever-tightening tax rules have contributed greatly to the design and development of motor vehicles, affecting the size and efficiency of engines, the levels of emissions and the types of fuel used.

All company car drivers will be familiar with the scale charges on motor cars. Currently a percentage dependent on official emission levels is multiplied by the list price of the vehicle, to arrive at a figure on which tax is assessed. Fuel provided for private use is also taxed using the same percentage applied to a figure of £23,400.

The Corporation Tax and VAT treatment of cars is also disadvantageous. From 1 April 2018 it is only possible to write off the full cost of a car against profits in the year of purchase if that car has emissions of 50 grams per kilometre or less. Otherwise only 18% or 8% is allowed, dependent on the emissions. Furthermore, except in special circumstances, the VAT on the cost of the car cannot be reclaimed.


Vans are treated much more leniently. VAT can be reclaimed on the purchase price, and, provided the Annual Investment Allowance has not been used against other assets, the full cost may be claimed against profits in the year of purchase. The driver of a company van is not taxed if private use is insignificant (HMRC have published guidelines to help taxpayers define ‘insignificant’). Where private use occurs the scale charge is a fixed £3,350 and fuel for private use is assessed on a fixed amount of £633 (2018/19).

It is not surprising therefore that manufacturers have made their vans increasingly more comfortable and car-like, and that some users have modified their vans to be more like cars. Why not have the tax advantages of a van combined with the comfort and flexibility of a car? Two employees of Coca-Cola tried this and, backed by their employer, found themselves in court against HMRC in what may have become a test case, given the amount of detail involved.

The case

The First Tier Tribunal case of Payne, Garbett, and Coca-Cola European Partners Great Britain Limited v The Commissioners for HMRC, tried last year, is a good example of how the wheels of British justice grind exceedingly small. The first and second named appellants were delivery drivers for Coca Cola and had previously been provided with estate cars, upon which they were presumably taxed in the normal way. A decision had been taken to replace the estate cars with vans. One assumes that the tax savings would have been considered but the stated reason for the change was the weight of the goods that they had to carry. They were therefore provided with a Vauxhall Vivaro and a VW Kombi respectively, and no doubt would have enjoyed the tax advantages of driving vans had their employer not also decided to have each van fitted with a second row of seats and additional windows (as well as a number of other minor adaptations). One is tempted to speculate at this point how the matter came to HMRC’s attention!

The transcript shows that the court case was lengthy and complicated. Expert witnesses were called and the mechanical features of each vehicle were examined in minutest detail. One of the vehicles was provided for inspection. The tribunal judge had to rule on whether each vehicle was a ‘goods vehicle’, that is ‘a vehicle of a construction primarily suited for the conveyance of goods or burden of any description’, or not.

If you are interested in the details follow this link to the court transcript.

The verdict

To cut a very long story short, the Vivaro was found to be a goods vehicle but the Kombi was judged to be a car. It seems that one key factor was that the Kombi’s design was based on a car originally, but the Vivaro was designed as a van. Another key factor was the proportion of total space remaining available for load-carrying when the second row of seats was in place. This latter consideration is important because it also comes into play should you decide to avoid having your employee’s vehicle taxed as a car by providing them with a four or five seater pickup, especially one to which a roof has been added over the payload section.

HMRC have published a list of vehicles which (unmodified) are taxed as vans. It is unlikely to publish a list of adaptions that would effectively cause a van to be treated as a car, and that is why this case is important. If you provide any employee with a company van (with a gross weight of less than 3.5 tonnes) and are not taxing them on it you should check with your local UHY tax partner that the extent of private use is within HMRC’s guidelines. If you are tempted to enhance the van to make it more like a car you definitely need to consult us and take this case into account.

Finally, the scale charges on vans and cars can be found here on our website.

If you would like to discuss the implications of this blog or for further information, plase contact me or your local UHY contact.

To read more of our automotive related blog posts, please click here.