In a surprisingly quick reversal, HM Revenue and Customs (HMRC) has withdrawn its proposal to significantly increase the taxation on double cab pick-ups used as company vehicles just a week after announcing the change.
The government declared plans on 12 February to reclassify double cab pick-ups as regular passenger cars for capital allowances and benefit-in-kind (BIK) tax purposes. This shift would have resulted in company vehicle operators facing substantially higher tax rates, with a Ford Ranger Wildtrak user facing an increase from around £132 a month (for a 40% taxpayer) to nearly £600 per month.
However, the decision faced intense opposition from various sectors, including the Society of Motor Manufacturers and Traders (SMMT). Chief executive of the SMMT, Mike Hawes, explained that “HMRC’s decision to tax them as cars rather than commercial vehicles for benefit-in-kind (BIK) purposes will raise costs significantly, and make them an untenable choice for many. The move risks stalling the overall market and its decarbonisation, as businesses will be likely to hold on to older vehicles for longer. With the new rules due in July, there is insufficient time for industry to adapt to such a major policy change.”
This widespread disapproval led HMRC to scrap the planned changes and maintain the current tax regulations.
“The government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax treatment,” explained the HMRC in a statement, noting that the “guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries.”
As a result of this turnaround, double cab pick-ups capable of carrying a payload exceeding one tonne will continue to receive favourable treatment in terms of capital allowances, benefit-in-kind, and VAT. Vehicles with lower payloads will remain classified as cars and be subject to higher BIK rates and company car taxes, as they are now.
Nigel Huddleston, Financial Secretary to the Treasury, confirmed the move, adding: “We will change the law at the next available Finance Bill in order to avoid tax outcomes that could inadvertently harm farmers, van drivers and the UK’s economy.”
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