Double cab pick-ups have historically benefitted from favourable tax rules, such as the ability to claim Annual Investment Allowance (AIA), lower benefit-in-kind rates, and full VAT recovery. The combination of passenger capacity, comfort and tax advantages has made them particularly appealing for employers and employees.
However, in recent cases, HMRC successfully argued that double cab pick-ups with a payload of one tonne or more should be treated as cars because their design was more aligned with private use (eg passenger seats and comfort features), prompting the government to look at the rules.
A formal announcement followed in early 2024 confirming that double cab pick-ups with the aforementioned payload may be classed as cars. The announcement was withdrawn within a week however amid lobbying from industry groups.
The delay was intended to give businesses and employees time to adjust, acknowledging the significant financial and administrative implications. The lobbying did not prevent the new government reaffirming the plans in the Autumn Budget, formalising the change to start from April 2025.
The three key changes for many double cab pick-ups are likely to be as follows:
- Capital allowances
- Double cab pick-ups will no longer qualify for AIA or full expensing. Instead, they will be subject to car capital allowance rates, and high CO2 emitting cars only qualify for 6% writing down allowances.
- Benefit-in-kind
- The benefit-in-kind tax for employees will likely rise significantly. As cars, the taxable benefit will be based on the vehicle’s list price and emissions, with rates potentially reaching 37% of the vehicle’s list price for high-emission models.
- VAT treatment
- VAT remains unchanged. Vehicles with a payload exceeding one tonne remain classified as ‘goods vehicles’ for VAT purposes, allowing businesses to reclaim VAT as before.
To ease the impact, the government has introduced transitional rules.
Vehicles purchased, leased, or ordered before 1 April 2025 (corporation tax) or 6 April 2025 (income tax) will retain their current tax treatment until the earlier of disposal of the vehicle, expiration of the lease or 5 April 2029. Vehicles purchased before 1 April 2025 should therefore continue to be treated as vans for four years.
Ahead of the changes coming in, we recommend reviewing your current vehicle fleets and the potential CO2 emissions of future purchases, and taking advantage of the existing rules before the April 2025 deadline.
For further assistance, please get in touch with your usual Kilsby Williams contact or email us at info@kilsbywilliams.com
