HMRC’s current position 

Currently, HMRC will treat a DCPU that has a payload of one tonne or more as a van for the following direct tax purposes:  

• benefit-in-kind (BIK) calculations;
• capital allowances; and
• deductions from business profits for:
  • hire costs where profits are calculated on the accruals basis; and
  • capital expenditure where the cash basis is used.

In so doing, HMRC is following the definitions of ‘car’ and ‘van’ that apply for VAT (VAT Notice 700/57).  

HMRC explains that a DCPU normally has: 

• two rows of seats in a front passenger cab with space for the driver and at least four passengers;
• four doors that are capable of being opened independently; and
• an uncovered pickup area behind the passenger cab. 

In a recent update to its guidance, HMRC says that references to DCPUs include “variants such as extended, extra, king and super cab pickups”. 

HMRC’s revised position  

At the Autumn Budget 2024, the government announced that HMRC will change its policy for DCPUs for direct tax purposes from: 

• 1 April 2025 for corporation tax; and 
• 6 April 2025 for income tax and national insurance contributions (NICs). 

From that date, HMRC will treat a vehicle as a van if the construction of the vehicle at the time it was made means that it is primarily suited for the conveyance of goods. No changes are being made for VAT purposes. 

HMRC says that, as a result of applying its revised policy, most DCPUs are expected to be treated as cars “because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability”.   

Tax liabilities may be increased, or tax relief given at a slower rate, where a vehicle is classified as a car rather than a van.

Transitional arrangements 

HMRC has provided transitional arrangements.  

For BIK purposes, an employer that has purchased, leased or ordered a DCPU before 6 April 2025 can rely on the current treatment until the earlier of disposal, lease expiry or 5 April 2029. 

For the purposes of capital allowances and deductions from business profits, HMRC’s revised policy applies with effect for expenditure incurred on or after 1/6 April 2025 (as applicable, see above). However, HMRC says that it will continue to apply its current policy for expenditure incurred up to 1 October 2025 where it was incurred because of a contract entered into before 1/6 April 2025. 

Background 

HMRC says that it is revising its policy because its current position is “at odds with” the Court of Appeal ruling in Payne & Ors v HMRC [2020] EWCA Civ 889. 

In February 2024, the previous government abandoned plans for HMRC to change its position in light of Payne and indicated that it would legislate to put HMRC’s current position on a statutory footing. At the Autumn Budget 2024, the current government announced that it would not pursue this course of action.  

Further information