Nov 01

Sage special Budget edition Double-cab pickups are to be classed as cars

Just in case you haven’t read the latest Autumn Budget summary we sent earlier this week, this is a very relevant change for some of you…

Double-cab pickups are to be classed as cars

Hidden in the latest Budget report is news that double-cab pickups will soon be taxed as cars, following a series of earlier U-turns on their classification.

This update comes after an initial attempt to classify double-cab pickups as cars for income tax in February, which HMRC reversed only a week later, maintaining their treatment as vans. Now, eight months later, the government has announced that double-cab pickups will again be treated as cars for certain tax purposes, effective from April 2025.

This change follows the court ruling in Payne & Ors (Coca-Cola) vs R & C Commrs (2020), which clarified the classification of these vehicles. Vehicles with a payload of one tonne or more will be affected, as pickups under this threshold are already taxed as cars.

The new rules will take effect on 1 April 2025 for corporation tax and 6 April 2025 for income tax, applying to capital allowances, benefits in kind, and certain business profit deductions. However, existing capital allowance treatment will apply to pickups purchased before April 2025, with transitional benefit-in-kind arrangements for employers who have already purchased, leased, or ordered these vehicles before 6 April 2025. This transitional treatment will remain in place until the earlier of disposal, lease expiry, or 5 April 2029.

Previously, the less preferential benefit-in-kind treatment for pickups was scheduled to begin on 1 July 2024.

Defining a Double-Cab Pickup

According to HMRC’s guidelines, a double-cab pickup includes:

A passenger cab with a second row of seats seating four passengers plus the driver
Four independently opening doors (two-door models are typically classified as vans)
An uncovered pickup area behind the passenger cab

Ongoing Debate and Mixed Reactions

The issue of double-cab pickup classification has been one of the year’s most debated tax topics and is expected to feature in discussions at the upcoming Festival of Accounting & Bookkeeping in March 2025.

Accounting industry readers and professionals have expressed mixed views on the reclassification. While some argue that the vehicles are not environmentally friendly and should be treated as cars, others criticize the government’s lack of consistency in policy. The back-and-forth on double-cab classification underscores the challenges in balancing practical policy changes with stakeholder impact.

One commentator observed that while HMRC may have initially justified treating pickups as cars, political considerations close to the election likely influenced the government’s reversal. With the election now behind them, the government appears to be moving forward with this reclassification, anticipating that any backlash will be minimal by the time of the next election.

The changes introduced will have significant implications, particularly for those who rely on double-cab pickups as part of their business operations. The new tax treatment could lead to higher costs for business owners, impacting decisions around vehicle purchases in this sector.

Download here for the full edition compiled by Sage and Company