HMRC U-turns on ‘terrible’ decision to close car tax loophole
The taxman has backtracked on plans to charge drivers of four-door pickups thousands more in car tax after backlash from farmers.
HM Revenue & Customs came under fire last week after announcing it would start classing commercial pick-up trucks as cars rather than vans.
The move – branded a “terrible mistake” by critics – was due to come into force from July, putting an end to a quirk allowing significant benefit-in-kind (BIK) tax breaks for drivers of four-door pick-ups.
Under the proposed changes, commercial pick-up trucks would have been classed as cars not vans, resulting in an almost five-fold increase to annual bills.
It meant a 20pc taxpayer driving a Ford Ranger Wildtrak as a company vehicle would have seen their annual car tax rise from £792 a year to as much as £3,492.
HMRC said that its new guidance will be “withdrawn” after farmers voiced concerns over the financial impact of the changes.
A statement from HMRC and the Treasury said: “Following the decision, farmers raised concerns about the risk of unintended harm to agricultural businesses affected.
“The government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax treatment.”
HMRC said its proposals were “not consistent with wider aims to support businesses”, and confirmed that double-cab pick-ups will “continue to be treated as goods vehicles rather than cars”.
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Orkney and Shetland MP, Alistair Carmichael, described the plans as a “terrible mistake”.
“Piling tax on farmers and crofters who use pick-up vehicles due to a simple oversight would have been a terrible mistake but it is emblematic of the myopic approach we often see from HMRC,” the Lib Dem MP said.
The new rules were due to apply to all double-cab pick-ups ordered after July 1, and from April 2028 for existing vehicles.
The changes would have put an end to a flat-rate charge, with bills calculated based on carbon dioxide emissions instead.
But due to HMRC’s rowback, pick-ups weighing more than one tonne will continue to be classed as a commercial vehicle.
Employees using the trucks can therefore continue to benefit from private mileage while steering clear of thousands of pounds in BIK tax.
A 20pc taxpayer driving a double cab pick-up as a company vehicle currently pays a flat rate £792 a year, while a 40pc taxpayer pays £1,584 a year.
Due to the favourable tax relief, sales of four-door pick-ups have significantly grown in the past decade. Pick-up registrations were up 22pc in the first half of 2023 according to the Society of Motor Manufacturers and Traders (SMMT).
