Double Cab Pickup

Posted on 9th December 2024 by Steven Burton

In February of 2024, the Government announced a change to the rules regarding the treatment of double cab pickups and whether they would be defined as a car or a van. It then made a dramatic U-turn only days later.

On 30 October during the budget, the Chancellor announced that the treatment of double cab pickups will indeed be changed.

From 1 April 2025 (and from 6 April 2025 for income tax), HMRC will now treat double cab pickup vehicles with a payload of one tonne or more as cars for the purposes of capital allowances and benefits in kind.

Existing capital allowances treatment will apply to vehicles purchased before April 2025, and transitional “benefit in kind” rules will apply for vehicles purchased, leased or ordered before April 2025. Employers will be able to use the previous treatment until the earlier of disposal, lease expiry, or 5 April 2029.

What is a Double Cab Pickup?

A double-cab pickup normally has:

• a front-passenger cab, with two rows of seats for the driver and around 4 passengers;
• four doors capable of being opened independently;
• an uncovered pickup area behind the passenger cab.

Corporation Tax & Self-Employed Income Tax

From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, double cab pickups will be treated as cars for the purposes of Capital Allowances.

Cars do not benefit from the favourable capital allowance regime typically applied to commercial vehicles. Whereas commercial vehicles ordinarily get 100% tax relief against business profits in the year of purchase, cars do not.  The capital allowances available for cars are based on emissions and for double cab pickups will likely be as low as 6% p.a.

The existing capital allowances treatment will apply to those who purchase double cab pickups before April 2025.

Benefit in Kind

From 6 April 2025, double cab pickups will be treated as cars for the purposes of “benefit in kind” rules.

Currently, double cab pick-ups do not give rise to a taxable benefit where private use is insignificant, and where there is significant personal use they are only subject to a fixed benefit of £3,960.  Under the new rules, a Toyota Hilux Icon Double Cab 2.4D 148hp Automatic has an OTR price of £33,295 and CO2 emissions of 232 g/km, putting it in the 37% bracket meaning BIK of around £12,300 a year.

Employees pay income tax on company benefits like cars, accommodation and loans.  Their employer takes the tax they owe from their wages through Pay As You Earn (PAYE).  The amount they pay depends on what kind of benefits they get and their value, there are particular rules about how to value the benefit of being provided with a company van or a company car.  On a benefit of £12,300 a 40% tax payer would pay annual tax of £4,920.

Employees do not usually have to pay National Insurance on benefits they get from their job, but their employer will pay National Insurance contributions on them instead, at a rate of 15%.

Directors of Limited Companies are employees, owners of the unincorporated sole trade businesses are not.

Transitional “benefit in kind” arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025.  They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

https://www.gov.uk/tax-company-benefits

Value Added Tax (VAT)

There is no change to the VAT treatment of double cab pick-ups. Provided the pick-up has a payload of 1 tonne or more it is considered to be a goods vehicle (van) for VAT purposes and VAT can be reclaimed according to the normal rules.

As a general rule you cannot claim VAT on the purchase of a car.  If you lease a car that is to be used both for the business and privately or is available for private use you will be able to claim 50% of the VAT incurred on the lease.

Action Point

If you are already considering the purchase of a new double cab pick-up, ensure this is completed prior to April 2025.

Bear in mind the transitional rules end in April 2029, when considering finance options on the vehicle.  A lease/hire purchase that extends past this point will likely mean that you will suffer these car tax charges at some stage.

Consider that the second-hand value of double cab pickups may well fall considerably as many of these vehicles are sold and hit the market at a similar time.

We can help

Please call if you need more information, or to learn more about how Steven Burton & Co can help you to better understand your business finances & tax affairs.

This material has been prepared for informational guidance purposes only.  Whilst every effort has been made to ensure the contents are accurate, information contained may not be comprehensive.  Furthermore it is not intended to provide, and should not be relied on for, tax or accounting advice.  Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided

Source:

The new approach is based on the EWCA’s decision in Payne & Ors (Coca-Cola) v R & C Commrs (2020) BTC19 (see EIM23121). This confirmed that when applying the primary suitability test at s.115 ITEPA 2003, decisions should not be reached on a narrow margin. It also clarified that where there are finely balanced cases (i.e. no predominant suitability for the carriage of goods can be identified), the default should be that they are cars.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23151