A tax ruling following a dispute between Coca-Cola and HM Revenue & Customs (HMRC) has seen the classification of double-cab pickups change from vans to cars.

Accountancy Moore Thompson has said the change will have “significant implications” for the farming community and small businesses.

The ruling closes a loophole that previously allowed these vehicles to benefit from lower Benefit in Kind (BIK) tax rates and VAT reclaim benefits.

Double-cab pickups with a payload of one tonne or more were previously classed as vans for taxation purposes.

However, an earlier ruling in 2020 (Payne & Ors (Coca-Cola) v R & C Commrs) by HMRC on the definition of a van has led to a “significant shift”, Moore Thompson said.

From July 1, 2024, most double-cab pickups are likely be considered cars due to their dual functionality, thus attracting higher taxes for their users.

Moore Thompson is urging owners of double-cab pickups used for business to familiarise themselves with the new tax landscape.

  • For business use: The possibility to claim capital allowances and reclaim VAT, subject to HMRC’s conditions;
  • For mixed use: The need to account for VAT on the private use portion and prepare for a BIK tax charge based on CO2 emissions and list price.

Owners who acquired their vehicles before this date may continue to benefit from the current tax rules until April 5, 2028, or until the vehicle is sold, depending on which comes first.

‘Landmark ruling’

Given the changes, Moore Thompson is emphasising the importance of establishing clear vehicle usage agreements to demonstrate the intended purpose of vehicles to HMRC.

Tax partner at Moore Thompson, Heather Bright, said: “This landmark ruling marks a pivotal shift in how double-cab pickups are perceived for tax purposes.

Farmers and small businesses that have relied on these vehicles for their dual-use benefits must now reassess their tax strategy moving forward.

“It’s crucial to understand the impact on both capital allowances and BIK tax charges, depending on whether the vehicle is used exclusively for business or mixed use.”

Bright said that the new tax classification change may present an opportune moment for the farming community to consider transitioning to electric vehicles (EVs).

“While practicality and the availability of suitable vehicles will need to be considered, there are numerous benefits to operating an electric van or truck, including Enhanced Capital Allowances, lower BIK rates, and eligibility for the Zero Emissions Goods Vehicle Grant,” she said.

“However, we fully appreciate the realities of modern farming and understand the value that many farmers place on double-cab pickups.

“Nevertheless, given these changes, they really must assess whether operating such as vehicle in their fleet makes sense from a tax and cost perspective going forward.”