When completing your annual expenses and benefits return, also known as the P11D, you will need to know what company-provided vehicles each employee and director has used over the tax year.
During this process, many encounter problems determining whether small commercial vehicles should be categorised as vans or cars – which of the two options you choose can have an immense impact on the taxable benefit level chargeable for the driver.
For example, in 2021-22, vans that run solely on electricity currently attract a zero taxable benefit, and the benefit assessed for using petrol or diesel vans was just £3,500. Should you drive a company car, on the other hand, this will generate a taxable benefit of up to 37% of the list price of the vehicle per year.
Determining Whether You Have A Car Or Van
Thankfully, HMRC has recently updated its guidance to clarify the difference between a car and a van for tax benefit purposes. These are as follows:
- Commercial vehicles: A vehicle primarily used to convey goods or burdens of any description.
- Cars: A vehicle that is suited equally to carrying goods or people.
This ruling is particularly relevant when dealing with double-cab pick-ups or combi-vans.
The construction of a vehicle determines whether it should be treated as a van instead of its use. For instance, if an estate car has blacked-out side windows to carry tools, it will still be classed as a car because it has been primarily designed to transport people. However, if it was to be adapted after leaving the factory, you will then need to reconsider whether it is still a car or now a van.
If it is proving tricky to decipher between the two, please feel free to talk to us about any vehicles that are on the boundary of being a car or a van, and we will happily advise.