HMRC internal manual

Employment Income Manual

Car benefit: car or van - summary

Section 115(1) ITEPA 2003

This page is designed to be issued to taxpayers wanting guidance on the difference between cars and vans for tax purposes.

In deciding whether or not a particular vehicle counts as a car for car benefits purposes, the starting point is the definition in Section 115(1) Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This works by exception: every mechanically propelled road vehicle is a “car” unless it is

  • (i) a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description),
  • (ii) a motor cycle (as defined in Section 185 Road Traffic Act 1988),
  • (iii) an invalid carriage (also as defined in that Act), or
  • (iv) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

Exceptions (2) and (3)

It is normally obvious whether either applies.

Exception (4)

This exception can also be discounted in most cases. Irrespective of their use in practice, there is nothing that renders most vehicles inherently unsuitable for private use. Indeed the marketing of many whose status might otherwise be uncertain is aimed at illustrating how well fitted they are for private use.

It follows that, if a vehicle is to escape from being classified as a car, it will normally need to satisfy the first of the tests in Section 115(1).

Exception (1)

This looks at the construction of a vehicle to see if it is primarily suited for the conveyance of goods or burden (note that ‘primarily’ is crucial and that ‘goods or burden’ does not include people). This means we must look to see if there is a predominant purpose of construction.

Actual use of a particular vehicle is irrelevant: the statutory test is a test of construction, not use.

The fact that the manufacturer or dealer describes the vehicle as a “commercial vehicle” is not conclusive.

If a vehicle is designed and marketed as a multi-purpose vehicle, it is unlikely to fall within this exception.

Even if the preceding 2 paragraphs do not apply but neither purpose predominates with regard to the construction of the vehicle, the vehicle is not primarily suited for either purpose and this means that it does not escape from being a car. Clearly if its primary purpose is to carry passengers it will also remain within the company car legislation (unless it is so big that it is clearly a bus). It is only if the primary purpose for which the vehicle is constructed is the carriage of goods that it will escape from being a car.

If a vehicle has side windows behind the driver and passenger doors, it is also unlikely to fall within this exception. This is particularly so if it is fitted, or is capable of being fitted, with additional seating behind the row which includes the driver. This remains true whether or not those additional seats are in the vehicle at the time.

There is guidance on the specific type of vehicle known as double cab pick-ups at EIM23150, on other off-road vehicles at EIM23145 and on other specific types of vehicle at EIM23155

Where a vehicle does escape being a car because exception 1 applies, the van benefit rules of Section 154 ITEPA will normally apply (EIM22700 for 2005/06 onwards, EIM22050 for years to 2004/05). Otherwise, unless the specific rules for heavy goods vehicles prevent a charge (EIM22990), the residual benefit rules of Section 201 ITEPA onwards will apply (EIM20000).

It is worth noting that Vehicle Excise Duty and VAT legislation are both different to tax legislation, so the same vehicle can be treated differently by the different agencies. For instance, VED is based on type approval at the time the vehicle is first registered, whereas VAT and the tax/NICs regimes consider the nature of the vehicle at the time of the transaction or in the relevant tax year.