HMRC issues U-turn over plans to stop drivers saving thousands in car tax

20 February 2024 , 10:29

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HMRC is no longer changing rules for pick-up drivers (Image: Getty Images)

HMRC has issued a U-turn after it revealed plans to close a tax loophole for pick-up truck drivers.

The tax office says it has "listened carefully" to feedback about the potential impact of changes to benefit-in-kind (BIK) rules. At the moment, double cab pick-ups that have a payload of more than a tonne are classed as a van and therefore qualify for cheaper company car tax.

But in an update last week, HMRC said it planned on changing the rules from July so that “most if not all” double cab pick-up trucks that are for work and personal use would instead be classed as cars. This would mean they lose their commercial vehicle status. HMRC has now confirmed it has scrapped these planned changes.

In an update on GOV.UK, HMRC said it has "listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax-treatment" and said the plans are "not consistent with the Government's wider aims to support businesses". The statement added: "HMRC have today announced that its existing guidance will be withdrawn, meaning that DCPUs will continue to be treated as goods vehicles rather than cars, and businesses and individuals can continue to benefit from its historic tax treatment."

Basic rate 20% taxpayers with a double cab pick-up pay a flat rate of £792 a year for a company vehicle, while higher rate 40% taxpayers pay £1,584 a year. If these vehicles were to be classed as cars, then the tax would be calculated on the cost and carbon dioxide emissions of the vehicle.

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Analysis by Autocar, which was published by The Telegraph last week, shows a basic rate 20% taxpayer with a Ford Ranger Wildtrak faced a tax bill of £3,492, or £6,984 for a higher rate 40% taxpayer, under the now-scrapped changes. HMRC said it originally announced the new rules due to double cab pick-ups being "equally suited" to both transporting goods and passengers.

It came 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.

Levi Winchester