Commercail vehicles are defined by HMRC guidelines. HMRC places vehicles into different categories, which often has implications for the amount of taxes paid on the vehicle.
Read this article to learn more about commercial vehicles used for business operations and the road tax for commercial vehicle benefits.
What Is a Commercial Vehicle?
A commercial vehicle is a vehicle that weighs at least 3.5 tonnes or more and can haul at least one tonne of cargo. Lorries, vans, tractors, pickup trucks, and “car-derived vans” are all considered commercial vehicles.
The full HMRC description of these vehicles is “commercial vehicles for business purposes”. In other words commercial vehicles are not meant for personal trips or else they will be subjected to benefit-in-kind taxes.
Requirements for a Commercial Vehicle
In order for a vehicle to fall under the category of commercial vehicle it must have a gross weight of 3.5 tonnes and must be designed to move goods or objects. It must not have windows and the loading area must be expansive.
However, the requirements for car-derived vans are a bit different. Car-derived vans have a design that makes them look like cars on the outside while they function like vans on the inside.
For a car-derived van to be classed as a business company vehicle, it must have a laden gross weight of 2 tonnes. Also, it must be built on a platform designed to build vans by the same manufacturer.
In addition, a car-derived van must not have back seats or windows, to discourage human transport. If it must have windows, they must be opaque or tinted.
Additionally, HMRC stipulates that car-derived vans cannot have floor panels. Rather, they can only feature loading bays.
These structural requirements are usually to ensure that owners do not use the vehicle for ferrying passengers. Once you use it for people transportation, it loses the commercial status.
Aside from these structural requirements, there are other conditions that a commercial vehicle must meet. The most important is that no employee can use the vehicle for personal commutes. If you can meet the requirements, you will enjoy paying less road tax on your fleet.
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What Taxes Are Required for Commercial Vehicles?
Compared to company cars, commercial vehicles pay lower taxes. While cars have different tax rates (based on emissions), all vehicles used specifically for commercial purposes fall in the same tax category. This makes tax calculations easier.
Before discussing road tax for vans and lorries, we must mention that HMRC charges no tax on vehicles used solely for work purposes. This means you won’t have to pay anything so long as the van sees no private use.
However, taxes will come up when your commercial-only vehicles enter the realm of private usage. This is the benefit-in-kind tax charged on company cars.
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How Are Electric Commercial Vehicles Taxed?
Electric vehicles used for business purposes, which include electric vans, are taxed a lower BIK in order to serve as an incentive for businesses to invest more into EVs. If you use an electric commercial van or pickup for work only, you could benefit from this tax cut.
However, if you use it outside work-related journeys, you have to pay a BIK tax. Fortunately, the road tax for commercial vehicles that are electric is around 60% of the regular runninng rate for non-electric vehicles.
Do Commercial Vehicles Have Any Benefits?
Unlike other vehicles, commercial vehicles can qualify for VAT relief under HMRC laws. You’ll need to keep proper records of mileage and fuel usage before HMRC can judge how much VAT relief your business qualifies for. Plus, the road tax for such vehicles is lower.
Commercial vehicles can be used to claim capital allowance. Business vehicles like vans qualify under the annual investment allowance that permits businesses to claim tax relief on certain products.
When used for this purpose, business vehicles will be classed under “plant and machinery”. This allows your business to benefit from capital allowances on their purchase.
Given the confusing nature of HMRC definition of a commercial-only vehicle, you should try to understand what it means before buying, to ensure that you don’t make the mistake of paying fees you incurred by mistake.
Tracking your vehicles miles is a great way to be sure you’re paying the right amount of taxes each year. Learn more about vehicle GPS trackers today.