Government U-turn On Double Cab Pick-Up Tax Changes

On February 12th, the government updated their ‘Employment Income Manual’ with a change to the tax treatment of double cab pick-up trucks. However, just a week later, the government responded to concerns by withdrawing its plans to raise charges. This surprising reversal in policy has understandably left many businesses confused about the implications and impact for their finances. This post will help to clarify the proposed changes, the HMRC’s statement of withdrawal, and what this all means for your business.

What were the proposed Double Cab Pick-Up Tax Changes?

A week ago, on 12th February, HMRC published a significant change to the tax treatment of double cab pick-up trucks following a recent judgement by the Court of Appeal. From July 1st 2024, these vehicles would be classified as cars rather than vans for employee tax purposes. This stems from the court’s decision that “these vehicles are equally suited to convey passengers and goods and have no predominant suitability.” 

As a popular choice for company cars, double cab pick-ups have historically enjoyed tax advantages, attracting both businesses and individuals. However, this advantage was set to change, with the Benefit in Kind transitioning from Van BIK to Car BIK – resulting in potentially higher tax liabilities for individuals. It’s worth noting that this update specifically affects pick-ups with a payload of one tonne or more; those with a payload of less than one tonne would continue to be classified as cars.

Government has since reversed the Double Cab Pick-Up Tax Changes

However, on February 19th, HMRC announced a large u-turn, stating that “its existing guidance will be withdrawn”. The government confirmed that businesses and individuals will continue to benefit from its historic tax exemption. 

They shared that “the government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax-treatment” and have acknowledged that their “guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses”.

Your company car will therefore continue to be treated as a commercial vehicle and receive the same tax advantages.

This development offers reassurance to company car drivers, as they can now expect no alterations to their employees’ tax obligations. Additionally, businesses investing in double cab pick-up vehicles will benefit from unchanged capital allowances in the first year of use. There will also be no amendments to VAT charges for a pick-up. Businesses using double cab pick-ups will benefit from a maintained favourable tax position across Benefit-in-Kind, VAT and Capital Allowances.

What does this mean for my business?

The government’s decision to revoke tax changes for double cab pick-up trucks is ultimately good news for your business; you will not face the previously expected increase in tax burden. The tax charges will now not increase when you provide a company car to your employees, or invest in a pick-up for yourself. This could result in cost savings for businesses, especially those that rely heavily on double cab pick-ups for their operations.

Whilst the impact is overall positive, we would still recommend seeking professional advice from your tax adviser to help you understand how the U-turn specifically affects your business’ finances and ensure you’re taking full advantage of any potential tax benefits.

For additional advice about company car tax treatment and general taxation support, please feel free to contact Tree Accountancy’s team of tax advisers.