Miscellaneous updates, 19 February 2024

HMRC has published a new section in its Employment Income manual which sets out that from 1 July 2024, certain double cab pick-ups will no longer be treated as vans for income tax purposes leading to significantly higher benefits in kind as a result of being treated as cars. The UK Government has agreed to update the terms for transitioning from the Digital Services Taxes to Pillar One and HMRC has published the latest performance data for the quarter ended 31 December 2023. And finally, this week, the National Audit Office has published its report on tax measures to encourage economic growth.  

Change in treatment of double cab pick-ups 

HMRC has confirmed in its Employment Income Manual that from 1 July 2024, certain double cab pick-ups will no longer be treated as vans and will be classed as cars for income tax purposes.  

According to the guidance in the Employment Income Manual, from 1 July 2024, HMRC will no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes. This VAT approach for double cab pickups differentiated the treatment based on payload, with anything under one tonne classified as a car, and anything a tonne or more as a van. This rule was replicated as a pragmatic way of resolving the primary suitability and classification of double cab pickups. Going forward, classification of double cab pickups will therefore need to be determined by assessing the vehicle as a whole at the point that it is made available to determine whether the vehicle construction has a primary suitability as per the two-part test outlined at EIM23115 onwards.  

As a result, from 1 July 2024, most if not all double cab pickups will be classified as cars when calculating the benefit in kind. This is because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.  

Transitional arrangements will apply for employers who have purchased, leased, or ordered a double cab pickup before 1 July 2024, meaning that they will be able to rely upon the previous treatment until the earlier of disposal, lease expiry, or 5 April 2028. The position prior to 1 July 2024 remains unchanged as outlined at EIM23150.  

Digital Services Taxes and transition to Pillar One 

The UK, together with Austria, France, Italy, and Spain, has agreed to update the terms for transitioning from their Digital Services Taxes to Pillar One and have also published a joint statement on the transitional approach. 

In 2021, 130 countries of the G20/OECD Inclusive Framework agreed on a two Pillar package of reforms to the international tax framework. In support of that, in a joint statement in the same month, the US, Austria, France, Italy, Spain, and the UK announced the terms of a political compromise on the transition from existing Digital Services Taxes to the new multilateral solution and to continuing discussions through constructive dialogue. 

In light of the continuing multilateral negotiations at the G20/OECD Inclusive Framework, those same countries recently announced an extension of the political compromise set forth in the October 2021 joint statement through to 30 June 2024 which is consistent with the revised timeline.  

Latest HMRC performance data 

The latest HMRC quarterly performance data has been published and specifically data in relation to the quarter ended 31 December 2023. Monthly performance data is also available for the month ended 31 December 2023.  

The Institute continually discusses HMRC service levels with HMRC and welcomes your feedback at any time by email. We recently requested feedback in relation to the most recent self-assessment filing deadline and are still accepting feedback on this until the end of this month. Members are encouraged to get in touch and share their experiences to enable the Institute to engage more effectively on their behalf with HMRC.