HMRC quietly closes car tax loophole in major blow for thousands of drivers

15 February 2024 , 10:44

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HMRC is changing the tax rules for pick-up trucks that are used commercially and for personal use (Image: Getty Images/iStockphoto)

HMRC has quietly announced it is closing a loophole that saves pick-up truck drivers thousands of pounds in company car tax.

The tax office has confirmed that from this July, “most if not all” double cab pick-up trucks that are for work and personal use will lose their commercial vehicle status. Under current benefit-in-kind (BIK) rules, double cab pick-ups that have a payload of more than a tonne are classed as a van and qualify for cheaper company car tax.

For a basic rate 20% taxpayer, they pay a flat rate of £792 a year for a company vehicle, while higher rate 40% taxpayers pay £1,584 a year. But after July, these vehicles will be classed as cars - and tax will be calculated on the cost and carbon dioxide emissions of the vehicle.

Analysis by Autocar, which was published by The Telegraph, shows a basic rate 20% taxpayer with a Ford Ranger Wildtrak would face a tax bill of £3,492, or £6,984 for a higher rate 40% taxpayer. The change, which was revealed by HMRC on Monday, will affect all new double cab pick-ups “purchased, leased or ordered” as company vehicles after July 1.

Existing drivers will continue to pay the company tax at the lower rate until April 2028. Any double cab pick-up that has been modified, such as by removing the seats and fittings, may also still be considered as a commercial vehicle.

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It comes after HMRC won a court case against Coca-Cola, which had argued that four-seat crew-cab versions of the Vauxhall Vivaro and Volkswagen Transporter vans used in its fleet should be taxed as commercial vehicles. The Court of Appeal ruled in favour of HMRC, which said they should be taxed as private cars.

Mike Hawes, chief executive of automotive trade body, the Society of Motor Manufacturers and Traders (SMMT), said: “Double cab pick-ups are critical business tools for many companies and sole operators across Britain, particularly in rural areas and in the construction sector. HMRC’s decision to tax them as cars rather than commercial vehicles for benefit-in-kind (BIK) purposes will raise costs significantly, and make them an untenable choice for many. The move risks stalling the overall market and its decarbonisation, as businesses will be likely to hold on to older vehicles for longer.”

A spokesman forHMRC said: “We’re changing the tax treatment of double cab pickups when used as a benefit in kind and when claiming capital allowances, following a Court of Appeal ruling. We’ve put in place transitional measures to help taxpayers adjust to the new rules.”

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