Understanding the Changes
Hidden away on page 133 in the notes to the 2024 Autumn Budget, the government has announced changes to the tax treatment of double cab pickup vehicles (DCPUs). Following a Court of Appeal judgment, these updates will come into effect in April 2025 and redefine how these vehicles are treated for tax purposes, including capital allowances, benefits in kind (BIK), and some business deductions.
This article will discuss the essential details, explain what’s changing, and guide businesses in preparing.
The Current Rules (Until April 2025)
HMRC has historically classified Double Cab Pickups with a payload of over 1 tonne as vans, not cars. This treatment allowed businesses and employees to benefit from lower Benefit in Kind (BIK) charges for personal use and a capital allowance treatment (the Annual Investment Allowance) that is not available for cars.
However, the classification of these vehicles has often been contentious. The 2020 Payne & Ors v HMRC Court of Appeal decision set a precedent that modified vehicles with dual purposes (like carrying goods and passengers) could be classified as cars, not vans. See our original article here.
The New Rules (From April 2025)
DCPUs with a payload of one tonne or more will be classified as cars for tax purposes with the following consequences:
- Capital allowances: DCPUs will no longer qualify as goods vehicles for AIA but will fall under car rules.
- Employees using DCPUs for personal use will face car BIK rates vehicles typically higher than those for commercial use.
- Certain expenses related to DCPUs will also be treated under car rules regarding business expenses.
Transitional Arrangements for DCPU Tax Changes
To ease the move to the new rules there is some transitional help:
- Capital Allowance Treatment: If your business purchases DCPUs before April 2025, you can continue to apply the current capital allowances treatment.
- Benefit-in-Kind (BIK) Treatment: Employers acquiring, leasing, or ordering DCPUs before April 6, 2025, can use the existing BIK treatment until whichever comes first:
– The vehicle is disposed of.
– The lease term ends.
– The cut-off date is April 5, 2029.
Get In Touch
So, while these changes may come as a blow to some business owners, there is still a window of opportunity benefit from the tax advantages of a Double Cab Pickup. A 4-year lease from April 5 will still provide the historical benefits. Otherwise, businesses should be planning whether they want to use this kind of vehicle in the future.
Our detailed budget content is here.
If you would like help with these type of tax matters please get in touch here.
