From 1 July 2024, company car drivers will no longer be able to take advantage of the low benefit-in-kind (BIK) rate applied to double-cab pickups.

This is due to upcoming changes to HMRC tax guidance, which will result in double-cab pickups being classified as cars, where they were previously treated as vans.

The new double-cab pickup benefit rules

In guidance updated on 12 February, HMRC stated: ‘From 1 July 2024, HMRC will no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes.

‘This VAT approach for double-cab pickups differentiated based on payload, with anything under one tonne classified as a car, and anything a tonne and over as a van.

‘Going forward, classification of double-cab pickups will therefore need to be determined by assessing the vehicle as a whole at the point that it is made available to determine whether the vehicle construction has a primary suitability as per HMRCs two-part test. ‘It therefore follows that from 1 July 2024 most if not all double-cab pickups will be classified as cars when calculating the benefit charge. This is because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.’

What do the changes mean, in terms of potential costs?

To take an example of a Ford Ranger and assuming a list price of £60,000

Under the current regulations, the van-based BIK would total £3,960. However, under the upcoming rules, the Ranger’s emissions would land it in the 37% company car tax bracket and its BIK would rise to £22,200.

For a top rate 48% taxpayer in Scotland, this would result in their vehicle BIK tax increasing from £1,900 a year to £10,656, based solely on the provision of the vehicle.

Questions remains over fuel benefits and VAT rules as well as the potential impact around capital allowances on these vehicles, so there will be further developments to follow.

What if I already own a double-cab pickup?

Currently owned double- cab pickups or those ordered, leased, or purchased before 1 July 2024 will be covered by transitional agreements. This means until disposal, lease expiry, or 5 April 2028, the previous rules will apply.

What are my options going forward?

This is likely to increase the movement to electrification of company owned vehicles. Company car tax BIK bands are based on the vehicle’s CO2 emissions, with reduced emissions resulting in lower and cheaper bands which favour hybrid and electric models. We are starting to see some electric pickups emerge on the market, the pace of which is likely to accelerate over the coming years.

We are seeing evidence of dealers contacting businesses using the impending end of June cut-off as a sales tactic. We would advise caution before committing to any new commercial vehicle agreement until we can fully understand the impact of the proposed changes. If in doubt, please don’t hesitate to contact us to discuss your options in further detail.