In case you missed our budget summary, we are reminding clients that double cab pick-up trucks are to be reclassified as cars from April.
Double cab pick-ups have always been somewhat of a grey area, whilst classed as commercial vehicles they are able to be used as family cars, having the dual purposes of being able to carry heavy loads as well as passengers.
What effect will this have?
The reclassification will affect how these vehicles are taxed in terms of benefits-in-kind (BiK), capital allowances and some business profit deductions (but, at yet, not VAT).
BiK
Transitional benefit in kind (BiK) arrangements will apply where employers have purchased, leased, or ordered a DCPU before 6 April 2025. In that scenario, the benefit will be one of a van until its disposal, lease expiry, or 5 April 2029, whichever date occurs first. DCPUs acquired after the change will be treated as cars, attracting hefty BiK charges with resulting tax liabilities on employees, and 15% employer Insurance contributions. Currently if a DCPU’s only private use is commuting it currently avoids a BiK charge, but would trigger a full BiK charge as a car.
New purchases from April 2025 will no longer be a tax efficient choice for company vehicles.
Capital Allowances and business profit deductions
The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025, still attracting the 100% Annual Investment Allowance. For those bought after 6 April 2025, as higher rate emission vehicles they will only qualify for the 6% annual writing down allowance, although sole traders and partnerships can generally claim a balancing allowance when the car is sold, whereas limited companies cannot.
VAT
The VAT legislation is worded in a different way. Currently DCPUs do qualify as vans for VAT purpose meaning VAT is recoverable. However, we strongly suspect that the legislation will be amended in due course to mirror that of the other taxes.
Please get in touch if you want to know more
If you would like further clarification on how these changes might affect you, please do not hesitate to get in touch.
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