HMRC confirms major car tax changes as popular vehicles given 'extremely important' update

HMRC has confirmed that the rules on VAT refunds and Vehicle Excise Duty for double cab pick-ups have not changed, in a welcome relief for drivers.

The clarification comes more than a year after most double cab pick-ups were reclassified as cars for company car tax purposes.

HMRC updated its Employment Income Manual after businesses and fleet operators raised questions about how the changes introduced in April 2025 affected other taxes.

The key message is that VAT-registered businesses can still reclaim input VAT on eligible double cab pick-ups under the existing rules.

TRENDING

Stories

Videos

Your Say

VED is also unaffected by the change in company car tax treatment, marking a positive move for manufacturers and businesses.

In response, Isuzu UK has confirmed that its entire D-Max range qualifies for a full VAT reclaim for VAT-registered businesses, as well as a zero per cent APR finance offer on its new electric pick-up.

The tax changes introduced in April 2025 followed an HMRC decision to stop using the same definition of a "car" and a "van" for Benefit-in-Kind tax purposes as it used for VAT.

Before the change, a double cab pick-up with a payload of at least one tonne was generally treated as a van for company car tax.

However, HMRC changed its approach following a 2020 Court of Appeal ruling in the case of Payne and others, commonly known as the Coca-Cola case.

The court ruled that where a vehicle does not have a clear main purpose of carrying goods, it should generally be treated as a car.

As a result, HMRC now looks at the overall construction and main purpose of each double cab pick-up.

Most modern double cab pick-ups are designed to carry both passengers and goods, allowing them to be treated as cars for BiK purposes, although this does not automatically affect their VAT treatment.

LATEST DEVELOPMENTS

• Electric car owners set to face 'significant taxes' when charging despite Andy Burnham's VAT cut
• Andy Burnham's Labour urged to rethink petrol and diesel ban and pay-per-mile car tax
• Labour's Fuel Finder tool branded a 'disaster' as £2m scheme leaves drivers 'disadvantaged'

The annual VED rate for these pickups remains £360 for both electric and petrol or diesel models.

There are also transitional arrangements for businesses that bought, leased or ordered a double cab pick-up before April 6, 2025.

These vehicles can continue to benefit from the previous van treatment until the earliest of the vehicle being sold, the lease ending, or April 6, 2029.

A vehicle can also be transferred between employees within the same organisation during the transitional period, provided it has not been sold, and the lease is still active.

Alan Able, Managing Director of Isuzu UK, said: "This month's clarification by HMRC is extremely important for many businesses and industries.

"Questions around how HMRC views double and extended cab pick-ups for the purpose of reclaiming VAT have caused some uncertainty.

"We confirm the full range of Isuzu D-Max in all cab layouts, both EV and ICE models, qualify for 100 per cent reclaim of VAT by VAT-registered businesses."

Every D-Max model, including single-cab, extended-cab and double cab versions, has a payload of more than one tonne and offers a towing capacity of 3,500kg.

The deal is available through a Hire Purchase agreement, requiring a 50 per cent deposit followed by 36 months of interest-free payments.

Our Standards: The GB News Editorial Charter