A final judgement from the Court of Appeal on the Coca Cola versus HMRC case
A common question for businesses is if a vehicle is a car or a van and this has historically been a grey area.
Since 2017 there has been an ongoing case between HM Revenue & Customs and Coca Cola that is likely to have a bearing on all future arguments into this matter.
Below is an outline of the case and the final outcome at the Court of Appeal. We would recommend anyone that owns a combi-van reads the article.
The Coca Cola case
In 2017 HMRC challenged the tax status of a number of vans provided by Coca Cola to their employees as company vehicles. The vans were a mixture of Vauxhall Vivaros and two versions of VW Transporter Combi T5s. All were of a panel van construction and, after adaptations, had been fitted out with racking inside for the goods that the employees had to carry, an additional row of seats behind the driver’s seat and a bulkhead between the rear seats and main load compartment, creating a vehicle with three compartments. The VW seats were supplied by VW with the vehicles and could easily be removed while the Vauxhall seats were fitted post-production but were bolted down.
In the opinion of Coca Cola, the vans all met the definition of the HMRC guidance for a Combi-van – despite having seats and windows behind the driver, they were rated to carry sufficient payload (1 tonne) to be regarded as goods vehicles, i.e. the primary purpose of the vehicle was to transport goods, not people.
HMRC disagreed, assessed Coca Cola for the additional National Insurance that would arise on them if they were cars, and assessed the employees for income tax on the higher benefit in kind charges.
Act 1 – The First Tier Tribunal
Coca Cola appealed to the First Tier Tribunal (FTT) and won in respect of the Vauxhalls but lost in respect of the VWs – this was surprising given that the VWs had removable seats and the Vauxhalls permanent.
The FTT determined that the Vauxhall, in having some load carrying capacity in the middle section, was (marginally) more suited for the carriage of goods and so remained a van but the VWs were equally suitable for both goods and passengers. Since they were not primarily suitable for the carriage of goods, the VWs were classed as cars but the Vauxhall remained a panel van.
Act 2 – The Upper Tribunal
Both parties appealed to the Upper Tribunal (UT) which confirmed the FTT decision.
Unlike the FTT decision, UT decisions form a binding precedent so, following that decision, it seemed that it was then the law that a VW Combi T5 is a car. To report otherwise on a P11D could be regarded as a deliberate misstatement on a tax return – tax evasion in other words. It also appeared to be the law that a Vauxhall Vivaro was a van.
But, looking at the detail, this did not really add any clarity to this age old issue. The judgment related to vehicles that had been adapted by the owners, so may not be relatable to other vehicles, and the difference between the treatment of the two types seemed illogical.
Act 3 – the Court of Appeal
Both the taxpayers and HMRC appealed again. They agreed that to treat each vehicle differently was wrong but differed on what that treatment should be.
HMRC wanted the Vauxhalls treated as cars, while the taxpayers wanted the VWs treated as vans.
The Court found for HMRC, the result of which is that the Vauxhall Vivaros were found to be multi-purpose vehicles and so not primarily constructed for the carriage of goods and so are to be taxed as cars. The VW Transporter’s status as cars was confirmed.
Where does that leave us?
Having read the judgement in detail, it is very hard to see how any combi-van – a panel van with additional seats – can now be anything other than taxable as a car.
These particular vehicles were better suited for the carriage of goods than many combi-vans, having bulkheads to protect the passengers from the load and so more capable of carrying a larger load as well as passengers.
Any van will have a passenger carrying capacity, in the front next to the driver, but a driver is likely to need a mate (or two – many vans have three seats in the front) to assist in the unloading and if he/she is there for that purpose then he/she is part of the load, not a passenger. But that cannot apply to additional passengers
It then follows that the purpose of carrying the additional passengers is not to assist in the carriage of goods but to transport the passengers to a place for another purpose. That then makes the vehicle a multi-purpose vehicle, not primarily a goods vehicle, and it is taxed a car.
And to avoid yet more protestations from desperate owners, throughout these arguments, the Road Tax status of these vehicles, or their registration at the DVLA, is irrelevant – the income tax/NI status and their registration and road tax status are separate matters and one does not affect the other.
Now the case has been settled we hope to receive some guidance from HMRC as to their approach to previously submitted P11Ds – will they seek their amendment, or will they only look forwards? If they look back, how far will they go? Four years is the norm, or will they go back only to 2018/19, when the upper tier tribunal reported?
Everyone with a Combi van in their fleet needs to think about how their vehicle has been treated.
P11Ds should be reviewed and at-risk cases identified.
But where a Combi has been treated as a van, they may not have been shown on a P11D at all – if the Combi was considered to be a van and was only used for work and normal commuting, there would have been no benefit, so it is not just a case of reviewing P11Ds but also considering unreported vans.
If any have been incorrectly classed as vans, and have been used for commuting, then a full fuel scale charge will be triggered and consideration should be given to making good the private/commuting fuel at least back to 6 April 2020 so that the fuel scale will not apply to the next round of P11Ds.