Double Cab Pick Ups
Before the legal and political debates, Double Cab Pick Ups (DCPUs) were widely classified as “goods vehicles” for tax purposes. This classification provided the following benefits:
- Capital Allowances – Businesses could deduct a substantial portion of the vehicle’s cost from their taxable profits.
- Benefit-in-Kind (BIK) Taxes – Employees faced lower BIK charges when using DCPUs for personal purposes.
This treatment made DCPUs an attractive option for businesses requiring both passenger and goods transportation. The traditional view remained largely unchallenged until the Coca-Cola case highlighted the need for clearer rules.
Labour Government’s Overturning
The Labour Government’s Autumn Budget 2024 confirmed the reclassification of Double Cab Pick Ups as cars for tax purposes, effective from 1st April 2025 for Corporation Tax and 6th April 2025 for Income Tax.
This decision aligns with the 2020 Court of Appeal ruling in the Coca-Cola case and supersedes HMRC’s earlier withdrawal of its February 2024 guidance, which had temporarily preserved the classification of DCPUs as goods vehicles. The implications of this overturning include:
- Capital Allowances – Purchases made after April 2025 will no longer qualify for the favourable Capital Allowance rules currently available to goods vehicles.
- Benefit-in-Kind Taxes – Higher BIK charges will apply to employees using DCPUs for personal purposes.
- NICs for Employers – Employers will face increased Class 1A National Insurance Contributions.
To ease the transition, the government introduced the following provisions:
- Vehicles purchased or leased before 6th April 2025 will retain the current tax treatment, including favourable Capital Allowances and lower BIK rates.
- This tax treatment will remain in place until the earlier of vehicle disposal, lease expiry or 5th April 2029.
These changes give businesses a limited timeframe to adjust to the new tax framework and take advantage of the current benefits.
The Conservative U-Turn
Before Labour’s latest ruling, the classification of Double Cab Pick Ups faced changes in February 2024. HMRC announced plans to reclassify DCPUs as cars for tax purposes from July 2024. This decision sparked backlash from farming and motoring sectors, which heavily rely on these vehicles.
Following the backlash, HMRC withdrew the updated guidance on 19th February 2024, allowing DCPUs with a payload of one tonne or more to continue being treated as goods vehicles. This reversal preserved the favourable tax treatment for:
- Capital Allowances – Businesses could still claim full tax relief on DCPUs under the Annual Investment Allowance.
- Benefit-in-Kind Taxes – Employees and employers benefitted from lower BIK rates.
However, the temporary nature of this reversal left many businesses uncertain about the future.
The Coca-Cola Case
The debate over the classification of Double Cab Pick Ups began in 2020 with the Court of Appeal’s ruling in the Coca-Cola case. The court found that multi-purposes vehicles, including DCPUs, should be classified as cars rather than goods vehicles for tax purposes.
This ruling exposed what HMRC considered a loophole: drivers of DCPUs were enjoying tax advantages similar to those of goods vehicles, despite the vehicles functioning partly as passenger cars. Following the ruling, HMRC moved to align tax guidance with the court’s decision. This included:
- Reclassifying DCPUs as cars for Capital Allowances and BIK purposes.
- Limiting the tax advantages associated with DCPUs, which many businesses had relied on.
These initial moves set the stage for the policy changes detailed above.
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