There is a significant difference, for tax purposes, in vehicles classed as cars by HMRC and those classed as commercial vehicles.
Cars with CO2 emissions of 95 or less will attract a 100% write off in the first year, but most will only receive capital allowances of 18% each year on a reducing basis. Worse still, those cars with CO2 emissions of 131 or more will only get 8% relief. Commercial vehicles, on the other hand, are classed as plant and machinery and are therefore able to form part of the annual investment allowance (currently £500,000).
So what is a commercial vehicle? You would be forgiven for thinking that this is pretty obvious, however such is not the case! Take, for example, a double cab pick up. The definition of a car is a mechanically propelled road vehicle, other than:
- a vehicle of a construction primarily suited for the conveyance of goods or burden of any description
- a vehicle of a type not commonly used as private vehicles and unsuitable to be so used.
Clearly, a double cab pick up can be used to transport goods but at the same time is also commonly used as a private vehicle. So is it a car or is it a commercial vehicle classed as plant and machinery?
The fact that the Dealer’s invoice shows the vehicle to be commercial does not mean that HMRC will treat it as such. However, when all factors relating to their construction are taken into account, a number of vehicles within this category do have a predominant purpose of carrying goods or burden. Each case will depend on the facts and the exact specification.
As a general rule of thumb for double cab pick ups only, HMRC accept that if the payload exceeds 1 tonne (1,000kg) it would be classed as a van.
The other main vehicle which causes similar problems is the Landrover. Again, the construction of the vehicle will be all important – are there rear seats, windows, etc? If so, HMRC will argue that it is a car rather than a van.
Clearly, if you wish to maximise tax allowances careful thought has to be given when purchasing vehicles of this nature. Should you require any further assistance please do not hesitate to contact Green & Co.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.