When an employer provides their employees with company vehicles for private use, the tax treatment of the vehicle varies significantly, depending on whether it is classed as a car or a van.

Generally, vans are treated more favourably than cars. However, determining whether a vehicle is a car or a van for tax purposes is not always as simple as it may sound.

This was evidenced in a recent tribunal case involving Coca-Cola, where The Court of Appeal (CA) ruled that three similar modified multipurpose vehicles (crew-cabs) provided by Coca-Cola to their employees were cars.

Different tax treatments of cars and vans

The tax treatment of a van is more beneficial from both an employer and employee perspective:


Input VAT cannot be reclaimed on the purchase of a car, but it is reclaimable on the purchase of commercial vehicles including vans.

Benefit in Kind

Whilst cars have variable tax rates based on CO2 emissions, a benefit in kind charge on vans and other light commercial vehicles such as pick-up trucks and SUV-based commercial vehicles are determined at a flat rate.

The current Benefit in Kind tax rate for light commercial vehicles treated as vans is £3490 for the 2020/21 tax year, and is multiplied by the rate of income tax paid by the employee, meaning a 20% taxpayer would be liable for £698 tax.

If a van is solely used for work purposes, HMRC sees this as having no discernible Benefit-in-kind meaning there is no tax to pay. This includes ‘insignificant private use’, such as making a one-off visit to a medical appointment during working hours. However, any journeys out of working hours which are solely for private purposes could create a taxable van benefit.

What is a van?

In legislation, a van is defined as:

  • A vehicle primarily constructed for the conveyance of goods or burden of any description
  • A gross vehicle weight – fully laden – not exceeding 3,500kg

HMRC v Coca-Cola (UKUT 9990 (TCC)

There are some grey areas though, particularly in relation to multipurpose vehicles, such as double-cab passenger vans with a second row of seats behind the front row, as has been evidenced in the long-running Coca-Cola tribunal case.

In the case, the CA ruled that two Volkswagen Transporter Kombi models and Vauxhall Vivaro were cars. In the earlier ruling, the Vauxhall Vivaro was judged to be a van by a ‘fine’ margin.

The vehicles, provided by Coca-Cola to their employees, look very similar from the outside, and had both been treated by Coca-Cola as vans.

Both vehicles are based on a panel van design and marketed as commercial vehicles, but have additional seating and windows behind the driver. Both had been subject to modifications after manufacture, as requested by Coco Cola.

The fact that the vans had a second row of seats behind the driver, meant it could be considered to be equally suitable for carrying goods or passengers, and thus not ‘primarily constructed for the conveyance of goods’. This fine margin meant the vehicles were not ‘van-like’ enough, and would instead be classed as a car.

The CA also ruled that the term ‘construction’ should refer to the condition of the vehicle after modifications and the state it was provided to the employee, rather than after manufacture.

The CA decision is in line with HMRC guidance which states that for a vehicle to be treated as a van, it must be primarily suited for conveyance of goods or burden of any description and that having side windows behind the driver, passenger doors and fitted or capable of being fitted with additional seating is unlikely to meet definition of a van.

Although there have been calls from leading tax officials for HMRC to make the guidance clearer, no changes have been made as of yet. Additionally, it is not clear whether an appeal by Coco Cola to the Supreme Court can be made so the ruling from CA is currently binding.

What should employers do?

Employers providing multipurpose company vehicles to their employees for private use should be aware of the potential risk involved, and will need to take their decisions into account when preparing P11D calculations for the tax 2020/21 tax year onwards. There may also be historic liabilities to consider if any similar crew-cab vehicles were made available to employees for private use in the past. The ruling and HMRC guidance should also be considered with any potential purchase of similar crew-cabs.

If you would like more advice on the tax implications of company vehicles, please do not hesitate to get in touch with our Employment Tax specialists today.