Treasury U-turn on tax hike for farming pick-up vehicles

Orkney and Shetland MP, Alistair Carmichael, has welcomed a climbdown by the government on planned changes to tax rules on double cab pick-up vehicles used by many farmers and crofters.

On Monday 12 February, HMRC updated rules on the tax treatment of Double Cab Pick Ups following a 2020 Court of Appeal judgment, which would have meant that from 1 July 2024, such vehicles with a payload of one tonne or more would be treated as cars rather than “goods vehicles” for capital allowances and benefit-in-kind purposes, increasing their tax liability. Following the decision, farmers raised concerns about the risk of unintended harm to agricultural businesses affected.

HMRC have today announced that the new guidance will be withdrawn. The government will consult on draft legislation to update the tax law without affecting farming businesses, before introducing it in the next available Finance Bill.

Speaking after the government U-turn, Mr Carmichael said:

“Piling tax on farmers and crofters who use pick-up vehicles due to a simple oversight would have been a terrible mistake but it is emblematic of the myopic approach we often see from HMRC.

“It is welcome, at least, that the government has increased the pace at which it U-turns on terrible tax policies. Even so this speaks once again to the lack of advocacy and knowledge within the Treasury of the needs and realities of rural communities. A little sense from the start would have gone a long way.

“We have to remember that the Treasury has form on this sort of issue. Two years ago they attempted to restrict red diesel exemptions for farmers and crofters with nonsensical bans on tractor runs and ploughing matches. It took a short but sharp campaign from our rural communities to force a change in course. Tax policy needs to encourage small rural businesses like our farmers and crofters – we will need a change in attitude from Treasury ministers and officials to make that happen.”