If a driver uses a company double or single cab pick-up for private mileage, he or she must pay company pick up tax.
Currently, HM Revenue & Customs classifies these pick-ups as vans – as long as they have a payload of 1 tonne (1000kg) or more.
A payload means the vehicle’s gross vehicle weight less its unoccupied kerb weight. Where a pick-up has a hard top, this is given a generic weight of 45kg. So a pick-up that has a payload of 1010kg will convert to a car under these definitions. So it’s important to ensure your pick ups qualify.
For the tax year 2006/07, the annual tax liability was £500. So if a pick-up driver paid income tax at 40%, he or she paid 40% of £500: an annual bill of £200.
However, this tax rose significantly from the 2007/08 tax year onwards. Instead of the £500 annual company pick up tax liability, it increased to £3000. So the annual tax bill for a 40% tax payer rose from £200 to £1200.
If the company also pays for private fuel, the driver is taxed on this, too. The annual company pick up tax liability for free fuel rose from April 6, 2010 to £550. So a 40% income tax payer will be charged 40% of £550 for free fuel: £220 per year. That’s in addition to the £1200 company pick-up tax.
However, if the driver covers no private mileage, there is no tax to pay. The taxman does not count driving the pick-up between home and work as private mileage. So if you take the pick-up home at night and do no other mileage, you do not have to pay company pick-up tax.
The taxman allows some ‘insignificant’ private use: such as dropping a child off at school on the way to work. But if the pick up is regularly used to do the supermarket run, that is counted as private mileage.
An employer pays Class 1a National Insurance on taxable benefits – this includes company pick up tax.
HM Revenue & Customs suggests that to avoid possible confusion, and tax liability, the following actions be taken:
- a mileage record is kept;
- an agreement is signed about vehicle use; and
- use of the vehicle is put into a contract of employment.
In reality, most pick ups, especially the more luxuriously equipped double cabs, are likely to be used for private mileage.
Company pick up tax is not applicable if the owner is a sole trader or trading as a partnership.