WHAT HMRC’S RECENT CHANGE IN LEGISLATION MEANS FOR YOUR DOUBLE CAB PICK-UP

In the Autumn Budget 2024, released on 30th October 2024, HMRC introduced a change in the legislature regarding the tax treatment of double cab pick-ups. Vehicles purchased from April 2025 will be classified as company cars for benefit in kind, capital allowances, and some deductions from business profits and subject to increased tax rates.

Isuzu UK assures you continual support and pledges to closely monitor the evolving situation, ensuring you receive the necessary assistance amid the regulatory changes. Consequently, this blog aims to help you navigate the key details of the new legislation and clarify frequently asked questions regarding the changes and how they may affect your double cab pick-up.

What are the new changes and how does this affect double cab pick-ups?

A) Benefit in Kind (BIK)

• HMRC has updated its legislation regarding the classification of double cab pick-ups, with regards to BIK, to be considered as cars as opposed to commercial vehicles from 6th April 2025.

• Double cab pick-ups will be moving away from the previously set flat rate of £3,960 and instead will be subjected to the car BIK rate, which can vary between 2% and 37% based on the vehicle’s CO2 emissions.1

• From 6th April 2025, electric double cab pick-ups with over 1-tonne payload will be subject to company car BIK rates (3%), increasing by 1% annually until 2028.

B) Capital Allowances (CA)

• Capital allowances allow businesses to deduct some or all the value of the items (such as vehicles) from the profits before tax.

• From 1st April 2025, double cab pick-ups will also be classified as company cars with regard to CA.

• Double cab pick-ups will be moving away from the previous classification as ‘plant and machinery’ for CA purposes and instead will be subjected to the company car rates, which can vary between 6%, 18% and 100%, based on the vehicle’s CO2 emissions.

Will there be a transitional period before the cut-off date?

• If you are a current owner or looking to purchase, lease, or order a double cab pick-up before 6th April 2025, HMRC has instated a transitional period before the cut-off date, whereby you will have the existing treatment until the earlier of disposal, lease expiry, or 5th April 2029.

• This mitigation will ensure that all double cab pick-ups already owned or purchased before 6th April 2025 will not be subject to the BIK changes and will be classified as commercial vehicles.

• Each case will be judged on an individual basis on whether the vehicle will be treated as purchased, leased, or ordered before 6th April 2025. You can demonstrate this by providing a contract, deposit documentation, written statement or email from the dealership/supplier confirming that an order has been placed.

Why have these changes been made?

• It has been concluded, from the Court of Appeal in Payne & Ors, that double cab pick-ups are equally suited to convey both passengers and goods, therefore not demonstrating a predominant suitability.

• As a result, dual-purpose double cab pick-ups will be considered as company cars for purposes of capital allowances, benefits in kind, and some deductions from business profits.

Will single cab / extended cab pick-ups be affected by this?

• No, single and extended cab pick-ups will be unaffected by the changes as HMRC ruled that they demonstrate clear suitability for commercial use.

What happens if you purchase a double cab after the transitional period?

• For end customers, utilising double cab pick-ups as company cars, the new legislature will incur the new tax treatment for vehicles purchased, leased, or ordered from 6th April 2025.

Will the changes affect double cab pick-ups from being VAT reclaimable?

• VAT treatment of double cab pick-ups remains unaffected. All double cab pick-ups with payloads over 1 tonne qualify for VAT reclaims if the business which purchases the vehicle is VAT registered. The changes only impact capital allowances, benefits in kind, and some deductions from business profits.

Isuzu UK’s commitment to supporting its customers is of utmost importance and Isuzu will continue to monitor developments closely and collaborate with industry stakeholders to help you navigate these changes effectively. Please stay informed of the upcoming changes by visiting the HMRC page regarding the legislative changes

www.gov.uk/government/publications/autumn-budget-2024.

Company Car Tax BIK Rates April 2024 to 2028

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23151