The Coca Cola case – when vans are cars and more tax is due!

The Court of Appeal gave its judgment in the Coca Cola Van case on 20th July 2020. The case had been first heard by the First Tier Tribunal back in 2017 with a finding that a Vauxhall Vivaro, fitted with seats in a “middle section” of the vehicle was a goods vehicle whereas a VW Kombi similarly with seats in a “middle section” was not.

The importance of this is the relatively absurd difference between the way that the provision to an employee of a company car is taxed (generally, an insanely high tax charge that bears no relationship to the true benefit provided) as compared with the taxation of vans (where the tax charge is comparatively modest or nil depending upon circumstances). This needs to be looked at against the broad spectrum of provision of vehicular transport to employees where there is both private and business use, where the resulting tax impact is basically completely incoherent.

The outturn of the CoA decision was that both vehicles met the definition of being cars. The result of this is potentially wide ranging and may slay various sacred cows regarding when what has been regarded as a van will instead be treated as a car.

The definition of the term car in the tax legislation combines positive and negative definitions: it is a mechanically propelled road vehicle that is not amongst other things a good vehicle and a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

A goods vehicle is defined as being of a construction primarily suited for the conveyance of goods.

Finally, a van is a goods vehicle not exceeding a design weight of 3,500 KG.

The VW Kombi had been manufactured and sold with removable seating in the middle section and it was advertised as “flexible, versatile …offering seats for up to five passengers”.

Both vehicles were multipurpose.

The CoA placed weight upon the word 'primarily'. Once a vehicle has more than one potential suitability, the CoA decision is that the word primarily must be first and foremost i.e. the first and foremost use of the vehicle must be the conveyance of goods. Both vehicles were found to be multi-purpose and on this basis not first and foremost good vehicles. This will extend, it is suggested to any vehicle with potential mixed use, for the avoidance of doubt, including double cab pickups.

There is, of course, the prsopect of this case being appealed up to the Supreme Court, however, in the meantime, it would seem prudent to assume that preconceptions as to when cars stop and vans begin may well have changed. Reliance may be sought on HMRC guidance, however, the Gaines-Cooper case shows how fragile this reliance, as a defence may be.