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A van by any other name…

6 Oct 2015

2 minute read

When selecting appropriate business vehicles, business owners may be able to choose between cars or vans. As well as taking into account your specific needs, you will want to make sure that each purchase is as tax-efficient as possible and provides the most benefits to your business.

A company van has a VAT benefit in that all of the VAT incurred on the purchase of the vehicle is recoverable. VAT recovery may be restricted for a van used by a sole trader or partner if the intended private use of the vehicle is more than de minimis. VAT for a car is unlikely to be recoverable as it is only possible to reclaim VAT on a car if it is used exclusively for business purposes.

What is the difference between a car and a van?

Here we explore HMRC guidelines on the subject. Historically, one confusing aspect when deciding between a car or a van has been those vehicles which seem to be somewhere between the two. Car-derived vans or combination vans in today’s business world may be able to function as a car while possessing the features of a van, such as a significant load area. A car-derived van is a vehicle that looks like a car from the outside. However, from the inside the vehicle looks like and functions as a van.

A combination van looks like a van but it can be fitted with, or includes, more seats behind the driver’s seat. A van is not defined in the VAT legislation but a car is. A car has three or more wheels and is either:

  • constructed or adapted to mainly carry passengers, or
  • has roofed accommodation behind the driver’s seat which is fitted with side windows or which is constructed or adapted for the fitting of side windows.

Some vehicles are specifically excluded from the definition of a car. A key example of this is a vehicle where the load area can carry a payload of one tonne or more. Recent developments in the industry mean that car-derived vans are now being produced with a payload of less than one tonne, blurring the lines between cars and vans.

In order to help businesses determine if VAT can be reclaimed as input tax on particular makes and models, HMRC has put together a list based on the information provided by car and van manufacturers, showing all current car-derived vans and combinations vans. The list also identifies those vehicles which are classified as cars and thus do not qualify for VAT recovery. So, for example a Mercedes Vito 190 CDI with a ‘compact dualiner’ is a van but if it has a ‘long dualiner high roof’ it is a car. The list can be found here: https://www.gov.uk/government/publications/hm-revenue-and-customs-car-derived-vans-and-combi-vans

Contact us for more information on how to maximise your VAT relief.

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