A recent Court of Appeal ruling against Coca-Cola European Partners (CCEP) has added confusion to company car tax rules. The case focused on whether certain vehicles provided to employees should be taxed as vans or cars. The decision has huge implications for businesses and fleet managers, especially regarding BiK tax.
Background to the Case
CCEP had supplied modified vehicles, including Volkswagen Kombis and Vauxhall Vivaros, which had initially been designed as panel vans. However, these vehicles had been altered to include additional features, such as extra seating and windows, making their classification unclear.
The question at the heart of the case was whether these modified vehicles should be classified as “vans” (which typically enjoy a lower tax rate) or “cars” (which are subject to a higher tax rate).
The Court's Journey
In the initial tribunal, the court ruled that the modified Kombis were not "goods vehicles" and should therefore be classified as cars. However, the Vauxhall Vivaro was deemed to remain a "goods vehicle" due to its configuration and use.
The upper tribunal upheld the FTT's ruling that the Kombis should be considered cars. However, they agreed that the Vivaro remained classified as a goods vehicle.
The Court of Appeal's decision went against CCEP, agreeing with HM Revenue & Customs (HMRC) that both the modified Kombis and the Vivaro should be classified as cars, subjecting them to higher BIK taxes than if they had been classified as vans. This decision has now become a key precedent for similar cases in the future.
Implications for Businesses
This ruling is set to have extensive consequences for employers who provide employees with vehicles that are modified to offer additional features. The Court of Appeal's decision clarifies that vehicles with extra seating or windows may be reclassified as cars for tax purposes, which will result in higher BIK tax charges.
For businesses, this creates a potential financial impact as fleet vehicles previously thought to be eligible for the van tax rate will now attract the more expensive car tax rate. Companies providing modified vehicles need to be aware of these changes and reassess their vehicle policies to avoid unexpected tax liabilities.
What Employers Need to Know
As vehicle designs evolve and more businesses offer custom modifications, the risk of tax reclassification grows. Fleet managers should carefully review their vehicle fleet and seek professional advice to ensure that all vehicles are correctly classified according to current HMRC guidelines. It’s crucial for businesses to stay informed about any changes in tax legislation and rulings to help manage their tax liabilities effectively.