Coca-Cola Court of Appeal defeat creates further company car tax confusion
Coca-Cola European Partners Great Britain Ltd’s (CCEP) defeat in its recent Court of Appeal case will further muddy the waters for fleets and manufacturers on what’s classed as a company car and what is a van – bringing significant tax implications.
CCEP’s defeat in the Court of Appeal is the latest in the long-running case, which has seen it fight HMRC’s judgment that its Volkswagen Kombis and Vauxhall Vivaros on fleet should be classed as company cars, not vans, and taxed accordingly.
The decision focused on the first and second-generation Volkswagen Transporter Kombi models – which offer two rows of seating with load space behind – and Vauxhall Vivaro vans. After looking at all the characteristics of the entire vehicle as provided to the employee, not just at construction, the Tribunal found the Kombis to be cars while the Vivaro was classed as a van. This left Coca-Cola liable for the NICs paid on the BiK on the Kombis, while two Coca-Cola drivers were faced with BiK bills.
After taking the matter to the Court of Appeal, CCEP has now lost its appeal on the Kombis being vans while the Vivaro has also now been classed as a car.
The CoA judgment (see full text here) centres around the capability of the vehicles to have a second row of seats and rear passenger window(s), which arguably gave them a dual purpose.
John Messore and Peter Moroz, joint managing directors of Innovation Tax and Mileage Consulting (Innovation), have said they’re disappointed with the judgment, which will bring added uncertainties for fleets and vehicle makers and could even provide a precedent for HMRC to challenge any van that has rear seats or benches, to collect more tax.
They commented: “The problem is that tax legislation is not that clear and simply defines a van as ‘a vehicle of a construction primarily suited for the conveyance of goods or burdens of any description’.
“The vehicles in this case both started life as panel vans, they were most likely insured as vans, registered at DVLA as vans, held out to be vans by the manufacturer, retailer, employer, driven by staff assuming they were vans for tax purposes and indeed used as vans.
“HMRC would however raise more taxes if they argued that the vehicles were cars not vans.
“What counted against CCEP was the second row of seats and rear passenger window(s) such that there was arguably a dual purpose. The vehicles could have been used to carry goods, but they could equally, in the view of the CoA judges, have been used to carry people.”
They added: “Common sense might say that both vehicles were designed for carrying goods and sometimes passengers or a crew are needed to undertake the work, so naturally there must be room for the passengers”
While it is unclear whether CCEP will appeal to the Supreme Court, Messore and Moroz added that the case will have far-reaching consequences.
“Far from providing clarity, this case has probably caused more confusion and uncertainty for taxpayers and manufacturers alike.”
They added: “We would not be surprised if HMRC now use this case as a precedent to challenge any van that has rear seats or benches or any potential duality of purpose to be reclassified as a car, and thus collect more tax.
“The question of how HMRC look at past P11D submissions of companies with this type of vehicle is also far from clear.”
To read Innovation’s full comments on the judgment, click here.