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Tax implications for electric vehicles: Car versus van

When it comes to the intricate distinction between cars and vans, several notable tax rulings have been made. But how does the variance in rules affect the tax consequences for electric vans?

Contrary to company cars, the Benefit in Kind (BiK) levy for an electric company van is non-existent, provided it’s used strictly for professional purposes within working hours. Conversely, should the van be utilised for personal activities beyond working hours, the BiK tax becomes applicable. The charge is identical to that for electric cars, currently pegged at 2 per cent.

This ruling, as dictated by HM Revenue & Customs (HMRC), implies that an electric van with any personal usage immediately reclassifies as an electric car, rather than a “goods vehicle” as per the definition in Section 115 ITEPA (Income Tax (Earnings and Pension) Act) 2003.

Contemporary van designs, marketed as multi-functional vehicles, are crafted to work around this HMRC stipulation. There’s a selection of such vehicles available that include crew cabs or “kombi” functionalities, facilitating passenger and goods transport.

This scenario has been legally examined numerous times. One standout case is Payne, C Garbett, Coca-Cola European Partners GB Ltd v HMRC, heard in the Court of Appeal on 20 July 2020. Here, HMRC successfully demonstrated that the VW Transporter T5 Kombi and Vauxhall Vivaro vehicles issued to Coca-Cola’s employees weren’t vans, but effectively served as cars.

Instances and court cases of this nature can complicate a company’s endeavour to optimise its vehicle fleet for tax efficiency, thereby making the selection process between cars and vans more complex.

In light of procuring new vehicles for your organisation, it’s imperative to consult with an expert. Contact us for more information.


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