Understanding if  the vehicle your planning to acquire for your  business is considered by HMRC to be a van as opposed to a car is a key element of company vehicle taxation and well worth researching if o ensure advantage is taken of favourable tax rules.

If you are VAT registered, you can claim back the VAT added to the purchase price (as long as there is no private use in which case you will have to apportion your claim) and the acquisition will qualify for generous tax allowances.

If you buy a car you cannot reclaim the VAT and tax allowances are far less expansive. There are exceptions; for example, if you by a car to use solely as a taxi or driving school vehicle, then VAT is potentially reclaimable and the ability to write off your investment against profits more likely.

Which begs the question, what is the definition of a car for VAT and tax purposes?

According to HMRC’s company vehicle taxation definitions set out in their VAT internal manual we will need to consider the following:

From the outside [car derived] vehicles still look like a car. However, from the inside the vehicles look like and function as a van. This is because:

  • the rear seats and seatbelts have been taken out, along with their mountings;
  • the rear area of the shell is fitted with a new floor panel to create a payload area; and
  • the vehicle’s side windows to the rear of the driver’s seat are made opaque.

HMRC have published a list of car derived vans that distinguishes between those that are considered to be cars and those that are considered to be vans. https://www.gov.uk/government/publications/hm-revenue-and-customs-car-derived-vans-and-combi-vans

A further complication are double cab pick-ups, are they cars or vans? It would seem that if the payload capacity is one tonne or more then the cab would be considered a van, any less than one tonne would be considered a car.

Obviously, these distinctions are important for VAT and tax purposes. If you are considering your options, we can help you research and buy a vehicle that meets your aesthetic needs and is still a tax effective purchase.

Understanding Company Vehicle Taxation

If you would like to discuss this topic or need further help with any accounting or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Paul Johnston

I'm Paul Johnston, owner of Bourne Accountancy, based in Caterham Surrey, offering a broad range of accountancy and specialist tax services to businesses and personal clients. My philosophy is always to do my utmost to provide friendly, courteous and efficient service.

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