The income tax, Corporation tax and VAT rules regarding purchasing a commercial vehicle are dependent on several factors. The areas for consideration are the actual requirement for a commercial vehicle, the usage of a vehicle and the technical specifications of the particular vehicle. There are two categories of commercial vehicle to consider, Vans and Heavy Goods Vehicles.
Vans
A van is defined as a mechanically propelled road vehicle that:
is a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description) and
has a design weight not exceeding 3,500 kg and
is not a motorcycle (essentially, a vehicle with less than four wheels)
The design weight of a vehicle is the weight which the vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden. It is relevant when deciding whether a vehicle is a van or a heavy goods vehicle.
A commercial vehicle, such as a van, will be considered a HGV if it's maximum design weight exceeds 3,500 kg the rules below would be relevant. If the maximum design weight of the vehicle / van is less than 3,500 kg it would be considered to be a van.
If the commercial vehicle meets the criteria above, it would usually be considered a van.
Double-cabs
Some pick-up style double cabs used to be classified as vans, rather than cars. This was changed in the Autumn 2024 budget and double cabs have been reclassified as cars again from April 2025. Transitional rules will be in place for those who already own a double-cab until 5 April 2029.
If a van is made available for private use it will attract a van benefit in kind
The benefit in kind would be reported on Form P11D at the end of a tax year (prorated if the van was not available for the whole year). Tax would then be settled via Self-Assessment / PAYE (if the Van was included in your PAYE code) at your marginal rate of tax.
If private fuel was also provided for the van, this also attracts a benefit in kind. This benefit would also be reported on Form P11D at the end of the tax year and tax settled via Self-Assessment or PAYE.
Any such benefits would then reduce the amount of basic rate band available to draw dividends, potentially increasing tax payable on dividend income. Please see this link to HMRC for further guidance and the current benefit value to be reported on the P11D. For 2023-24 this is £3,960 for the van and £757 for private use of fuel.
You don’t have to report or pay anything to HM Revenue and Customs (HMRC) if your van is used only for business journeys or as a pool van. Further clarification regarding restricted private use can be found here.
A business journey is a trip:
Vans used for ‘insignificant’ private journeys are exempt, e.g. making a slight detour to pick up a newspaper on the way to work (the primary purpose remains busienss) or dropping an old mattress to the tip because it won't in your car (a rare one off event).
You won’t need to report your van if it’s all the following:
available for use and used by more than 1 employee
available for use and used by more than 1 employee
available to each employee because they need it to do their job
not ordinarily used by 1 employee to the exclusion of others
not normally kept at or near employees’ homes
used only for business journeys - limited private use is allowed, but only if it’s incidental to a business journey, eg driving home to allow an early start the next morning
VAT
VAT would be recoverable if the vehicle (HGV or van) was used for business purposes. If there was no business requirement for the vehicle, it would be difficult to justify a VAT reclaim.
Capital Allowances
Capital allowances are available in full.
Heavy Goods Vehicles
Generally a Heavy Goods Vehicle (HGV) can be provided to an employee with no income tax or NIC consequences, assuming it is NOT solely used for private purposes (i.e. it is required, and used, for business purposes also).
A Heavy Goods Vehicle is defined as a vehicle which has a maximum design weight exceeding 3,500 kg. If the business has no requirement for a HGV, it would be difficult to argue that it was purchased for use in the business and was used for anything other than private purposes. In these circumstances, a benefit in kind would arise, calculated as 20% of the asset value at the date it was first made available.