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May 31st 2019

What is a "commercial" vehicle for tax purposes?

These days, combi vans and double cab pick-ups seem to be very popular and we see lots of businesses buying them as they are very functional for carrying heavy loads and also being able to carry passengers. As well as that, you will often hear that they are fully tax deductible

One of the most common issues we encounter with tax is where a business owner is been told a vehicle is definitely “a commercial vehicle” by the seller, which it may well be for vehicle certification purposes, however the rules for VAT, capital allowances and company benefits in kind (BIK) all define, and tax, vehicles in different ways. The devil is in the detail.

For example, a double-cab pick-up may be classed as a commercial vehicle on the V5 (or a dealer might just say so to get the sale!), however for getting a full write off against profits through the Annual Investment Allowance, it must have a payload of at least one tonne.

Unfortunately, HMRC have lots of rules over what qualifies as a commercial vehicle and what counts as an ‘ordinary’ motor car, and the distinction is crucial because UK tax laws are often a good deal more favourable towards the commercial vehicle user.

Definition of a motor car for VAT purposes:

A car for VAT purposes is any motor vehicle of a kind normally used on public roads which has 3 or more wheels and either:

  • is constructed or adapted mainly for carrying passengers
  • has roofed accommodation to the rear of driver’s seat that’s fitted with side windows or that’s constructed or adapted for the fitting of side windows

However there are several exceptions to the above definition, including (for example) vehicles with a payload of 1 tonne or more.

Definition for Capital Allowances purposes:

For capital allowances purposes a car is a mechanically propelled road vehicle other than:

  • a motor cycle;
  • a vehicle constructed in such a way that it is primarily suited for transporting goods of any sort; or
  • a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

Emergency vehicles, hackney cabs, and double cab pickups with a payload of 1 tonne or more are generally excluded.

Definition for Income Tax Benefit in Kind purposes:

For capital allowances purposes a car is a mechanically propelled vehicle which is not:

  • a goods vehicle;
  • a motor cycle;
  • an invalid carriage; or
  • a vehicle of a type not commonly used as a private vehcile and unsuitable to be so used.

We strongly recommend you give us a call and check the tax position of a vehicle before handing over your hard-earned cash – it could save a significant amount of tax!

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