10 August 2020
When is a van not a van?
We were very disappointed to read that Coca-Cola European Partners Great Britain Ltd (“CCEP”) recently lost their appeal against the judgment that VW Kombis had been held to be company cars (not vans) by the lower Courts, and that had HMRC won their appeal that Vauxhall Vivaros should be classed as Company Cars, not vans. The full text of the Court of Appeal (“CoA”) judgement can be found at https://www.bailii.org/ew/cases/EWCA/Civ/2020/889.html
The problem is that tax legislation is not that clear and simply defines a van as…
a vehicle of a construction primarily suited for the conveyance of goods or burdens of any description.
The vehicles in this case both started life as panel vans, they were most likely insured as vans, registered at DVLA as vans, held out to be vans by the manufacturer, retailer, employer, driven by staff assuming they were vans for tax purposes and indeed used as vans.
HMRC would however raise more taxes if they argued that the vehicles were cars not vans.
What counted against CCEP was the capability of the vehicles to have a second row of seats and rear passenger window(s) such that there was arguably a dual purpose. The vehicles could have been used to carry goods, but they could equally, in the view of the CoA judges, have been used to carry people. What they were actually used for did not matter.
If you have any vans with a second row of seats then the CoA suggested that they have a dual purpose and, per para 92 the judge said that 115(2) “required the taxpayer to demonstrate that the predominant suitability of the vehicles in question is for the conveyance of goods or burden”.
This interpretation comes from the words “primarily suited”.
There is also S115(1)(d) to consider. This clause deals with the definition of a car and excludes “a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used”.
This point seems not to have been exhausted in Court but clearly a vehicle where the passengers cannot look out of both windows, because there are no windows, or at best one, is clearly not suitable to be used as a private vehicle. The Court decided this was not relevant as this was part of the definition of what was a car rather than what was a van. This leaves us in the curious position that it is theoretically possible to construct a vehicle that falls outside both the definitions of a car and a van!
It is also amazing that there are different definitions of a car / van for VAT purposes as opposed to Income Tax. One can only assume that they should be consistent and that Parliament or the legislature would want them to be similar. As the definition for VAT is less ambiguous then maybe that should have been the starting point.
So, let us look for a clue as to what Parliament intended in the VAT definition of a car / van to be found at SI 1992/3122 which defines a car for VAT purposes as being:
“motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either–
(a)is constructed or adapted solely or mainly for the carriage of passengers; or
(b)has to the rear of driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows;
but does not include–
(vi)vehicles constructed for a special purpose other than the carriage of persons and having no other accommodation for carrying persons than such as is incidental to that purpose.
So for VAT the vehicle has to be PRIMARILY (i.e. solely or mainly) for carrying passengers for it to be a car, whereas the opposite point was made in the CCEP judgement – i.e. the judges said it had to be clear that the primary purpose was to carry goods for it to be a van.
Also, the VAT definition clearly says rear windows (plural). In the case of the Vivaro there was only one rear window and so does not fit the definition of a car.
Common sense might say that both vehicles were designed for carrying goods and sometimes passengers or a crew are needed to undertake the work, so naturally there must be room for the passengers. Picture if you will a utilities vehicle (van) where a concrete mixer and pneumatic drills are carried in the rear section, but a crew of 4 workmen ride in the front and their job is to dig and then refill a hole in the road. The vehicle would be similar to those in this case but how can anyone say that that vehicle was anything other than a van, i.e. work vehicle?
Even having two rear windows is not decisive as double cab pick-ups can be accepted as vans even if they have rear passenger windows. In this case both vehicles had a load capacity of a ton and so I cannot see how they can be classed as anything but vans.
There is also the question of health and safety. If I were driving a 3.5 ton vehicle I would want rear windows out of which to look when reversing or taking a sharp turn.
Finally it was a contractual requirement that the rear seats be removed in the Kombis during working hours, and I wonder how many of those seats were actually ever re-inserted (due to the effort required) and so most of the time there were probably no rear seats, again indicative of a goods vehicle – not a passenger vehicle.
All of these factors proved to be irrelevant in Court.
It is unclear if CCEP will appeal to the Supreme Court. In my experience such appeals are the exception and there is never a guarantee of success in any Court case and so this case could set a precedent for many other taxpayers. However I think the matter is far from settled and another taxpayer with slightly different facts could possibly overturn this case.
Far from providing clarity, this case has probably caused more confusion and uncertainty for taxpayers and manufacturers alike.
HMRC has previously produced a list of trade vehicles and vans with rear seats showing whether they are classed as a van (commercial vehicle) or a car for VAT purposes, but this is not exhaustive and only applies for VAT
We would not be surprised if HMRC now use this case as a precedent to challenge any van that has rear seats or benches or any potential duality of purpose to be reclassified as a car, and thus collect more tax.
The question of how HMRC look at past P11D submissions of companies with this type of vehicle is also far from clear.
The key, as we say in all our articles, is not to make assumptions about tax – as most assumptions I see are invariably wrong – but instead to seek expert professional advice, even over something as apparently simple as deciding if something is a car or a van.