15 September 2017
A recent tax tribunal case (Noel Payne vs HMRC) has concluded that a VW Kombi vehicle should be considered as a car, not a van, for benefit in kind (BiK) purposes.
Although most vehicles can be clearly categorised as either a car or a van, recent years have seen the introduction of double cab pick-ups and Kombi vehicles with a dual purpose of carrying goods and also having enough seats to carry four passengers. The distinction between a car or van is especially important when it comes to BiKs, because the tax treatment for vehicles primarily constructed to carry goods and vehicles constructed to carry people is different.
To illustrate the impact, taxable car and fuel benefits on a typical Kombi would be over £20,000 so an actual cost of £8,000 for a higher rate taxpayer whereas treatment as a van would mean benefits of less than £4,000 and tax of just £1,600.
There is a well known HMRC concession for double cab pick ups, but it has been unclear until now how the Kombi-style vehicle should be treated.
Whilst the case has no legal precedent it does give a clear indication of how this might be interpreted in other cases, and a successful challenge by HMRC could lead to considerable tax liabilities for both employees and employers.