The recent First-tier Tax Tribunal case of HMRC v Coca-Cola (GB) Ltd considered whether the first and second-generation Volkswagen Transporter Kombi models which offer two rows of seating with load space behind and Vauxhall Vivaro were vans for the purposes of the legislation found at section 115(2) of ITEPA 2003.

Coca-Cola (GB) Ltd contended that both versions of the Kombi and the Vivaro were vans on the basis that they had been constructed primarily for the purpose of conveying goods rather than passengers.

After looking at all the characteristics of the entire vehicle as provided to the employee, not just at construction, the Tribunal found the Kombis to be cars while the Vivaro was classed as a van.

The Judge suggested that, “The burden of proof lies upon the Appellants to show that the construction of the Vivaro and the Kombis was primarily suitable for the conveyance of goods or burden and that in the Judges view for the reasons given, that burden has been discharged in relation to the Vivaro but not in relation to the two versions of the Kombi.”

Various experts engaged by both sides provided opinion on the primary purpose of each vehicles construction and how they had been altered to enhance their ability to carry both passengers using more than one row of seats, but leaving load space behind the seats.

The Judge found that the ability to adapt a vehicle to carry burden was not in fact the requirement of the legislation which was focussed on the “primary” purpose of construction at the outset.

In conclusion, the Tribunal found that the Vivaro should be classified as a van as the over-riding factor seemed to be the significant cargo space available in the middle section, even with the middle seats in place, compared with the VW Kombi.

It seems that the judgement has done little to help employers who provide vans to their employees in considering whether the vehicle is indeed a van for the purposes of declaring the appropriate benefit-in-kind.

It also seems fair to say that current HMRC guidance is misleading given HMRC acceptance that a double cab pickup with a payload of one tonne or more, excluding its hard top, is a van for benefit purposes yet HMRC has challenged other types of vans with a second row of seats to be cars, despite being classified by DVLA and insurance companies as designed and constructed for the carriage of goods.

This could potentially now leave the door open for HMRC to change their guidance and challenge double-cab pickups and their general classification as a van. A lot of these vehicles will never carry goods in their working life, the passenger compartment exceeds the area to which goods could be carried, so what therefore is their primary purpose, or should HMRC take into account what the vehicle is actually used for in relation to the business and the person using it?

As there is no benefit-in-kind for a van with no private use (excluding commuting), the change in classification to a car would be extremely expensive for the employer and the employee, as the provisions of a ‘car’ which allowed commuting from home to work then becomes private use under such rules, leading to potential car and fuel benefits where previously there would have been no benefit-in-kind at all.

The position cries out for clear and unambiguous advice on the question of what is a van from HMRC who have commented: “We welcome the First-tier Tribunal’s decision to uphold HMRC’s classification of the VW Kombi Transporter T5 (first generation) and VW Transporter T5 Kombi van (second generation). We are considering the tribunal’s decision in relation to the Vauxhall Vivaro.”

This is not entirely helpful from HMRC as each case is potentially different depending on the type of vehicle, what its intended initial primary use was and the interpretation of both the taxpayer and HMRC in considering these…

HMRC and the Tribunal have potentially opened a hornets nest here which could lead to more enquiries ending with dispute in relation to the types of vehicles used and the accompanying benefit-in-kind issue.

If you have any queries regarding HMRC’s decision or whether it affects you or your client, then please contact Richard Clutterbuck or Julia Clutterbuck.

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