A luxury tax on double-cab pickups that cost over £35,000 (+ VAT) could prove a fair solution for future tax treatment purposes, according to Shoreham Vehicle Auctions (SVA).
Now that Benefit-in-Kind treatment of one-tonne double-cab pickups (DCPUs) is on HMRC’s agenda, SVA is calling for the industry to work together on a fair and efficient solution.
MD Alex Wright believes the conversations should be ongoing to ensure they shape new legislation that does not penalise the business use of these vehicles.
“The industry must consult with HMRC to get the right decision over the line,” said Alex Wright.
“HMRC is looking to settle a taxation issue that has been bubbling for more than two decades. It wants to get rid of the grey areas that are in place that encourage tax avoidance, which we can understand,” he added.
Earlier this year, HMRC announced plans to change the tax treatment of double-cab pickups – then scrapped them just a week later.
New guidance was issued on 12 February 2024 announcing that double cabs with a payload of one tonne or more would be treated as cars rather than goods vehicles for both capital allowances and Benefit-in-Kind purposes from 1 July 2024. The move was meant to address a loophole whereby some double-cab pickup drivers pay less tax than on traditional company cars – and followed a ruling in the Court of Appeal that declared multi-purpose vehicles such as pickups were passenger cars – but resulted in uproar amongst the farming and motoring sectors.
The change was reversed and HMRC said double cab pickups would continue to be treated as goods vehicles rather than cars – and that it would consult on draft legislation to ensure that it achieved that outcome before introducing it in the next available Finance Bill.
Following the change of policy and subsequent reversal, SVA has talked to dealers, fleets and SMEs, including farmers, and says its solution of a luxury tax on DCPUs costing £35,000 (+VAT) would denote them as being recreational as opposed to business use vehicles.
Using such a mechanism would mean high-value, high-spec pickups purchased by SMEs and consumers alike and fitted with large petrol engines, which would normally command a high level of taxation if fitted in a car, would be affected by the new luxury tax. Meanwhile, companies who buy and run DCPUs costing much less than £35,000 for genuine business use would not be penalised.
The £35,000 luxury tax would also keep rental and leasing companies happy as it would protect residual values of business vehicles and help them predict future values more accurately.
“We want to protect sales and residual values, as well as avoiding penalising staff who drive DCPUs for business use,” said Wright.
“Leasing and finance companies shouldn’t have to pay for the cost of HMRC policy changes. If a future date is confirmed to roll out new legislation, risk managers can plan accordingly to make the right decisions for their companies and not have to make provisions for residual value losses when disposing of existing stock.
“Companies are investing in DCPUs to safely carry people, equipment and tools. We don’t want a situation where HMRC taxation might compromise work efficiency and safety,” he added.
Alex Wright is also inviting any feedback to his luxury tax proposal – and says he’s happy to be part of any industry group that works alongside HMRC to bring the DCPU legislation to a suitable conclusion.
