Sticking seats back into a car-derived van can be a false move incurring significant and costly tax charges, says CBVC Vehicle Management.
Putting seats into a car-derived van could entail HMRC re-evaluating the vehicle as a car affecting VAT, Employers’ NIC, capital allowances, corporation tax offset of rentals and Benefit-in-Kind (BiK) tax on the vehicle and fuel.
The warning comes from Burton upon Trent fleet management specialist, CBVC Vehicle Management, which says the cost savings when buying the car-derived van can be highly attractive, including full VAT recovery for outright purchases, recovery of VAT on lease rentals, 100% offset of lease rentals against corporation tax, BiK scale charge of £3,430 for a van with private use in the current tax year, as well as National Insurance Contributions (NIC) based on a scale charge.
By comparison, a comparable company car will have a BiK tax bill many times greater than a van, with only 50% of the VAT on leasing rentals being recoverable and NIC paid on the vehicle’s full scale charge, based on its PIID value.
As a result, CBVC says it may be tempting to buy the van and repurpose it afterwards with seats, yet still claim it is a van and paying van tax rates. The warning also follows the findings by an upper tribunal in March, which dismissed appeals from Coca Cola that had been using some commercial vehicles as company cars.
CBVC managing director, Mike Manners, said: “We have been asked this question on several occasions, by companies running what are clearly car-derived vans.
“But then, perhaps in response to dealer advertising or the wrong advice, they have sought to retro-fit items, such as rear seats, to turn them into what in the eyes of HMRC would be passenger cars.”
For example, a Land Rover Discovery Commercial 2.0 SD4 HSE 240hp auto with a PIID value of £60,950 with retrofitted rear seats installed would have a high probability of HMRC reclassifying the van as a car and backdating all relevant taxes and costs involved.
“Our calculations show that, in that event, the company acquiring the vehicle would face an extra £6,790 in year one in NIC, non-recoverable VAT, increased rental charges, road tax and DVLA fee.
“And the driver would face extra BiK charges as well. A 20% taxpayer would pay an extra £3,241 and a 40% driver would pay an extra £7,655. That’s an additional cost of over £14,000 in just one year,” Manners said.
“Our advice to our fleet customers is unequivocal. Never tamper with a van’s specification, even if you have been told that it is perfectly acceptable thing to do, unless you want to face the possibility of retrospective vehicle and tax charges. In all cases, talk to your fleet management specialist for advice,” Manners concluded.