The taxation of double-cab pickups has emerged as one of the most contentious issues in UK tax policy this year. Following a series of U-turns and fluctuating regulations, the government's latest announcement has once again redefined how these vehicles are classified for tax purposes.
In a move that many are describing as a "tyre-screeching U-turn," the government has decided to treat double-cab pickups with a payload of one tonne or more as cars, effective from 1 April 2025 for corporation tax and 6 April 2025 for income tax. Single cab pickups continue to be classed as commercial vehicles.
This decision follows a lengthy saga that recently came to a head with HMRC’s initial controversial announcement in February 2024 to classify these vehicles as cars. However within days this announcement was repealed and they continued to be classed as vans.
The changes stem from the court case Payne & Ors (Coca-Cola) vs R & C Commrs (2020), which called into question the existing classifications. The implications are significant, affecting capital allowances, benefits in kind, and certain deductions from business profits.
What does this mean for businesses?
Capital Allowances
For businesses that purchase, lease or order double-cab pickups before 6 April 2025, the current capital allowances will continue to apply allowing businesses to benefit from 100% tax deductions in the first year under the Annual Investment Allowance or full expensing for new vehicles.
This means businesses can continue to use the previous tax treatment until the vehicle is sold, the lease expires, or by 5 April 2029, whichever occurs first.
Double cab pick-ups purchased after 6 April 2025 will be classified as cars, and so do not qualify for Annual Investment Allowance, super-deduction, full expensing or 50% first-year allowances.
Benefits-in-kind (BIKs)
The reclassification of double cab pick-ups to cars means that employees who use double cab pick-ups for personal as well as business use will see potentially significant increases in their BIK tax liabilities.
What can businesses do?
The good news is that there’s still a window to allow businesses to plan ahead. If you’re currently using double cab pick-ups now is a good time to evaluate your current fleet needs and consider more tax efficient alternatives.
If you are considering purchasing or leasing a double cab pick-up for business use you may want to consider doing this before April 2025 so that you benefit from the existing tax treatment.
If you have a vehicle lease that extends past April 2029, be aware that the vehicle will be considered a car for tax purposes from this point.
If you need further help or advice, please contact your usual Moore adviser.