HMRC is considering a change to car tax rules that could give drivers an £8,000 rebate. The potential shake-up from the taxman and the Labour Party government could mean more electric pick-up trucks qualify for VAT reclamation by business operators.
Current VAT Rules for Pick-Up Trucks
For double-cab pick-up trucks to be classed as commercial vehicles for VAT purposes, they must have a payload of at least one tonne. However, due to the weight of EV batteries, electric trucks struggle to meet this requirement compared to diesel models.
Industry Calls for Change
HMRC has responded after calls from the Society of Motor Manufacturers and Traders (SMMT) for a rule change. A spokesperson said: "As part of those discussions, SMMT set out the commercial challenges faced by manufacturers of double cab pick-up vehicles in meeting the current payload tonnage requirement for electric vehicles, given the size and weight of batteries. SMMT has submitted a proposal suggesting a reduced payload threshold for electric DCPUs, which would allow them to be treated as commercial vehicles and enable VAT recovery on the purchase price. We are considering this proposal."
The change, which is not yet confirmed, would allow firms to reclaim nearly £8,000 on some models.
Understanding VAT Reclamation
JT Hughes explains the current rules: drivers can reclaim VAT if the vehicle is not a VAT "car" and it is used for business. "If it is a VAT car, purchase VAT is blocked unless used exclusively for business and not available for private use," it adds. Taxis, self-drive hire, and driving instruction are specific exceptions.
Typical scenarios include 100% reclamation for 100% business use. For mixed business/private use (not a VAT car), drivers can either apportion the input VAT now or reclaim in full and account for output VAT on private use each return using a fair and reasonable method. If it counts as a VAT car, purchase VAT will be blocked unless exclusively business and not available for private use. Repairs and maintenance VAT can still be reclaimed to the extent of business use.
