I own a small business and I have a number of salesmen and technicians on the road. I provide them with a panelled van as car benefit in kinds are expensive. Should I be worried about the recent Coca Cola case?
It might look like a van and you might call it a van but to calculate tax on a benefit-in-kind don’t assume that it is, in fact, a van.
When an employer provides a vehicle which an employee can use privately, it matters whether the vehicle is a car or a van because the applicable income tax and NIC charges are very different. From both the employer and employee perspective, it is much more beneficial for the vehicle to be treated as a van.
However, the definition of a van is not always clear-cut. In March this year, the upper tribunal (UT) of the courts upheld a decision of the first tier tribunal (FTT) that two apparently similar multipurpose vehicles provided by Coca-Cola to their employees were in one case a van and in the other case a car.
For benefit-in-kind (BIK) purposes, a car is defined by what it is not – and it is not a goods vehicle. A van, on the other hand, is a goods vehicle with a design (laden) weight of 3.5 tonnes or less. A goods vehicle is then further defined as “a vehicle of a construction primarily suited for the conveyance of goods”. The Coca-Cola case turned upon whether or not the three types of vehicle provided to employees were, or were not, goods vehicles.
During the periods under enquiry, three different modified vehicles were provided: a first or second generation VW Transporter T5 Kombi (Kombi) which were largely similar, and a Vauxhall Vivaro.
The Vivaro vehicle left the assembly line as a panel van and was subsequently modified by Coca-Cola to add a second row of two seats behind the driver together with a single window. The seats did not span the full width of the vehicle, leaving some storage space to the side. This would become very important. The Kombi vans (both models) were also based on a panel van but arrived from the manufacturer with a second row of seats already fitted. This row spanned the full width of the vehicle, and there were windows on both sides. However, the whole row of seats could be removed without tools and it was a requirement that the seats were removed during working hours. In determining if these vehicles were goods vehicles, the tribunals looked in detail at two elements of the test: ‘of a construction’ and ‘primarily suited’.
The UT accepted that removable items such as the seats in the Kombi vehicles should still be considered to be part of the construction of the vehicle. After all, many parts of a car, from the wheels upwards, can be removed.
The next stage of the test was whether each vehicle was primarily suited for the conveyance of goods. This requires the taxpayer to take a step back to view the position as a whole. The courts noted that where a vehicle is equally suitable for both goods and passengers, then it has no primary suitability and thus cannot be a goods vehicle.
On this basis, the UT agreed with the FTT’s decision that the Kombi vehicle was a car for the purposes of the benefit-in-kind rules. As it concluded that the vehicle was equally suited to moving passengers or goods and had no primary suitability. This was in part due to the fact that the extra row of seats could be removed for goods or reinstated for passengers.
The UT court accepted, on a fine balance, the Vivaro was slightly more suited for goods given the storage to the side of its second row of seats and thus remained a van.
If you look at pictures of both vehicles you will probably be confused. As tax advisers, we should be concerned about whether vehicles that look like vans from the outside are actually vans, and but we should also ask clients about what their vehicles look like on the inside.
Just because a vehicle is a car for BIK purposes doesn’t necessarily mean that it is a car for other taxes. For VAT purposes, a car is a vehicle which, while being adapted solely or mainly for carrying passengers and with roofed accommodation to the rear of the driver, also has a payload of under one tonne. Any vehicle capable of carrying more than that will escape the car classification for VAT purposes regardless of its seating arrangements.
The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
Malachy McLernon l Director