Significant changes to the taxation of double cab pick-up trucks (DCPUs) will come into effect in April 2025, impacting businesses and fleet operators across the UK. The Treasury has confirmed a policy shift, reclassifying these vehicles for Benefit-in-Kind (BIK) tax and capital allowances purposes, following a landmark Court of Appeal ruling.
The decision stems from a 2020 case involving HMRC and Coca-Cola, where the court determined that multi-purpose vehicles equally suited to carrying passengers and goods should be treated as cars. This ruling necessitates a reassessment of how DCPUs are taxed. From next spring, they will be treated as company cars, leading to potential changes in tax liabilities for businesses using them.
This change specifically affects the BIK tax and capital allowances associated with DCPUs. However, the government has emphasised that Vehicle Excise Duty (VED), commonly known as car tax, will remain unaffected. DCPUs will retain their classification as light goods vehicles (LGVs), meaning the current VED rate of £335 per year will continue to apply, increasing to £345 in 2025/26 in line with the Retail Price Index (RPI).
To mitigate the impact on existing vehicle owners, a transitional arrangement has been implemented. Businesses that purchased, leased, or ordered a DCPU before 6 April 2025 will continue under the previous tax regime until the vehicle is disposed of, the lease expires, or 5 April 2029, whichever occurs first. Similarly, the existing capital allowances treatment will remain for vehicles acquired before April 2025, ensuring a smoother transition for businesses already invested in these vehicles.
A Treasury spokesperson stated that aligning the tax treatment of DCPUs with case law is appropriate, given their suitability for both passenger and goods transport. They further highlighted that not implementing these changes would represent a substantial tax break, potentially costing hundreds of millions of pounds annually. The discrepancy arises from the definitions within VED legislation, which the Treasury confirms remain unaffected by the court ruling.
The updated guidelines will undoubtedly impact businesses heavily reliant on DCPUs for their operations. The change in BIK calculations will affect company car schemes and overall tax burdens. While the government has attempted to soften the blow with transitional arrangements, the long-term implications for fleet management and operational costs remain a concern for many. The announcement serves as a significant reminder for businesses to review their vehicle tax planning in light of these forthcoming changes and to understand the implications for their future fleet management strategies. The changes are designed to ensure a fairer tax system, particularly given the generally higher emissions of these vehicles.
