Where vehicles are made available to employees and directors for private use then a charge under the benefits code arises, typically charged by way of a P11D. Generally it is more tax efficient if a van is made available as opposed to a car. This tax efficiency applies at both the employee and employer level.
The Court of Appeal (CoA) has decided on a case concerning Volkswagen’s Kombis and Vauxhall’s Vivaros that had been made available to employees of Coca Cola. The lower tribunals had found that the Kombis were not vans and the Vivaro was. The CoA has overturned these decisions by holding that both were not vans.
The definition of a van in the legislation is a “goods vehicle of a construction primarily suited for the conveyance of goods or burden of any description”. The CoA reviewed the meaning of both ‘construction’ and ‘primarily suited’. If found that construction meant the state of the vehicle at the relevant time, in this case, when made available to the employees. It didn’t mean what the starting point of the vehicle was but what the vehicle, the round, when made available.
When considering what ‘primarily suited’ meant the CoA took a different view from the lower tribunals. These tribunals had considered all the features of the vehicle and came to the conclusion that on balance the vehicles were more suited to one particular type of activity, either the transport of goods or people. The CoA reject this approach. It said the meaning of ‘primarily suited’ meant what was the first and foremost use of the vehicle, there was no fine balance but rather a black and white view of matters. If the vehicle was a multipurpose vehicle, then it can’t be primarily suited to carrying goods. Only a vehicle that is primarily suited to moving goods could be considered a van
The CoA reject the taxpayers appeal and allowed HMRC’s appeal while also awarding costs to HMRC.
The decision can be found at: Payne & Ors v Revenue And Customs – Find case law (nationalarchives.gov.uk)
This decision has helpfully clarified the definition of a van, making what was previously a rather grey area a bit more black and white.
Please contact us if you have any questions with employee benefits and how to structure tax efficient benefits. We are experienced with the issues.
