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Should my company buy a double cab pick-up?
17 November 2023
Accounting & Compliance, Reducing Tax
Double Cab Pick Ups and the Tax Benefits
We recently explored the options of owning a hybrid vehicle in your limited company and whilst this is a great idea for some, we know there are others out there who may not find this the most viable option.
In this blog we discuss double cab pick ups which are again a great option to have as a company vehicle with many tax benefits.
VAT Benefits
A vehicle is treated as a commercial vehicle for VAT if the payload is one tonne or more.
In many cases a double cab pick up is going to meet this requirement.
This means that there is potential to recover the input tax on the purchase which could save the company thousands in comparison to buying a car.
Please note that there are potential input tax restrictions as detailed in our blog It’s a car! It’s a van! It’s a tax headache waiting to happen!
Benefits in Kind
Similar to the VAT requirements above, a double cab is treated as a ‘van’ for tax purposes* if the payload of the vehicle is one tonne or more.
This has huge tax savings for the company and the individual.
Example
Looking at a Ford Ranger, this has a payload of 1,200kg and CO2 emissions are 220g/km.
For 23/24 if the Ford Ranger were to be treated as a car, there would a charge of 37% of the list price (circa £37k) added to your taxable income, around £13-14,000.
A fuel benefit would add an additional amount of income circa £10k.
Depending on your other income, you could be paying tax on this benefit between £4.8k – £10k.
Treated as a van?
In comparison, as the Ford Ranger meets the requirements to be treated as a van, there is a flat rate charge for the benefit of £3,960 for the benefit and £757 for the fuel benefit for 2023/24.
The potential tax charge on this benefit is circa £1-2k depending on your other income.
The charge is only 1/5th of the amount compared to a similar car!
Additional Benefits
This is without mentioning the Class 1A National Insurance charge that the company would pay at 13.8% of the benefit value!
There is also an added benefit that commuting rules do not apply to a van in the same way that they do a car, therefore there is a chance that you would not have a benefit on your double cab anyway!
*this rule only applies to double cabs and not all vehicles
Corporation Tax
There are also huge savings in the company when buying a double cab, again as this qualifies as a van, the company will benefit from getting 100% relief in the company in the year of purchase*, in comparison to a car where you will likely be restricted to 18% relief per annum.
*subject to method of purchase
Summary
To summarise, there are a lot of tax savings that can be made with a double cab, and whilst this isn’t the only consideration that you would be looking at when you buy a new vehicle, it is definitely an area that it comes out near the top, when compared to other vehicles.
Double checking your position!
However as always, we recommend that you check with your accountant before making any purchase to ensure that all boxes are ticked from a tax perspective and you don’t leave yourself with any unexpected tax bills!
Disclaimer: This blog post is for informational purposes only and should not be considered professional tax advice.
Be sure to consult a qualified expert for personalised assistance with your specific situation.
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The content in this blog is correct as at 10th October 2023 See terms and conditions.
