Whether your business buys a car or a van can make a big difference to the tax relief given on the cost of the vehicle and to the tax payable by the driver who uses it for private journeys.

In both cases the tax position is more favourable for a van: in legal terms – ‘a vehicle of a construction primarily suited for the conveyance of goods or burden’.

Some combi-vans, which have a row of seats behind the driver, are equally suited to carrying people (on the extra seats) and goods. In such cases the Court of Appeal has recently decided that the vehicle must be treated as a car for employee benefits purposes.

Where your business already owns a combi-van you should review the P11D returns submitted for the driver of that vehicle for the tax years 2018-19 onwards.

As the definition of a car for capital allowance claims is almost identical as for employment taxes, you also need to review your capital allowance claims for any combi-vans.

Fortunately the definition of a van for VAT purposes is rather different and generally depends on whether the vehicle can carry a payload of at least one tonne. You can reclaim the VAT charged on acquiring a van but not on the purchase of cars, with the exception of taxis.

If you are thinking of buying a new van for the business check the tax position with us first, as just because it looks like van does not mean it is not a car!

This article is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.

Andy Fleet

Author Andy Fleet

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