Crew Cabs - Benefit in Kind.. is it a van, a car or a head in the sand?

We recently received an enquiry from a client asking about buying a new Hilux Crew Cab through their Limited company. The salesman in the garage told him he can “buy it through the business” and “claim the Vat”. Our client wanted to be sure so came to their Kalc account manager for a 2nd opinion…

The client in this case was told 3 things about this purchase, but the 4th was left out, and it’s the 4th that’s the important one-

The Lines Were;

1. “There’s much lower VRT as it’s a Crew Cab”.

2. “You can buy this through your company as a commercial and tax it commercially”.

3. “You can reclaim the VAT on this through your business”.

Point 4 was omitted as I doubt it does sales any good...

4. Benefit in Kind on crew cabs is the same as a car and should be processed through your payroll each week/month.

The first 3 points are all true in one way or another, but all need to be taken with caution.

 

The Crew Cab is classed commercial for VRT purposes, and this particular type of vehicle has a VRT rate of about 13% compared to 35% for a new car. VRT is handled by the garage, so this is in the hands of the car dealers and the Revenue systems assigning the rates.

Taxing the vehicle commercially is a massive annual saving as its classed as a goods vehicle. (approx. €333 compared to €1800 for a 3L engine) In order to remain as a commercial vehicle no private use is permitted. 

VAT may be reclaimed where the vehicle is used exclusively for business purposes. If any private use take place, the vat reclaim should be apportioned accordingly. 

Test Case to Revenue

We recently took a test case to revenue seeking clarification on the whole area. 

In the eyes of Revenue, a crew cab is the same as a car and should be subject to the same BIK rules.

Assuming the client is already at the high rate of tax, and very low business mileage is completed, this particular client is looking at the following BIK charge per year-

  • Crew Cab cost €55,000

  • BIK rate annually 30% (Less than 24,000 business KMs per year)

  • Annual BIK deemed benefit reported through payroll €16,500

  • Approximate tax cost to the individual annually €8,500

In this particular situation, the Crew Cab was bought on Hire Purchase over 5 years, so in this instance, between the vehicle cost, interest and BIK, the crew cab has cost well in excess of €100k.

The Bottom Line

While not all situations are similar to this, it must be said that many we have seen at Kalc are not quite as straightforward as the enthusiastic car salesperson eludes to, and will need to be fully explored before committing to any purchase.

At Kalc Accounting we are always delighted to help advise you to make sure you are making your decision with all of the facts and no nasty hidden surprises!

Contact our team today at info@kalcaccounting.ie or on 01 8084191

 

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