Following the notorious U-turn in February, the government have stated that double cab pick-ups will no longer be treated as commercial vehicles from April 2025.
Amongst a host of announcements made in the budget, the change in treatment of double cab pick ups (DCPUs) is something that went under the radar as it was not included within the speech itself. From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, the vehicles will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits.
Back in 2020, HMRC won a tax case in the Court of Appeal against Coca-Cola which concerned certain DCPU vehicles. For many years the VAT rules have permitted DCPUs to be treated as vans rather than cars for VAT purposes where, broadly, they have a useful payload (carrying capacity) of at least 1 ton. In practice, HMRC had allowed this treatment to also apply to the rules for both Capital Allowances and employment benefits.
In February 2024, HMRC updated their manuals to clarify that in line with the Coca-Cola case, DCPUs would be treated as cars from July 2024 onwards. However, with the 2024 general election on the horizon, this decision was “U-turned” on just days later.
Fast-forward to now, the new Labour Government’s Autumn Budget Report contains details explaining that they will go ahead with the change originally made in February and will follow the decision made in the Coca-Cola case with DCPUs being treated as cars for Income Tax and Corporation Tax purposes from April 2025 onwards.
The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. This means that any DCPUs purchased and available to the business prior to April 2025 will qualify for a 100% tax deduction the first year through the Annual Investment allowance (or full expensing if bought new and unused).
It is stated that 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.
These details give businesses a few months to plan ahead and potentially replace any DCPUs with new ones, as a last chance to benefit from the preferential tax treatment that they currently bring.
If you have any questions about how the budget or its proposed reforms might affect you, do get in touch on 01242 776000 or tax@randall-payne.co.uk.
