Lisa Lokasto

For years, converting SUVs and passenger cars (M1) into light commercials (N1) was a common practice. Many buyers assumed that once the council issued a new logbook, motor tax was changed to goods, and the vehicle started passing CVRT(NCT) tests as a commercial, everything was in order. This is not the case.

MARCH 2024 CHANGES

The March 2024 rule change (see below) revealed just how shaky these conversions are for anyone buying a pre-2024 vehicle

Prior to March 2024, a flaw in the system allowed certain conversions to be processed through local Motor Tax Offices. If a vehicle’s log book showed Category A (passenger car) at J1, no Revenue VRTCONV declaration was required.

Councils could accept conversion certs, update the logbook to N1, switch the tax class to commercial and send the vehicle forward for commercial testing. The owner starts paying commercial tax and testing, with no prior Revenue involvement. All good? Well no, Revenue weren’t happy with some of these conversions and subsequently challenged the VAT deductibility.

Since March 2024, all conversions to N1 with more than 3 seats must go through Revenue. MTOs are no longer allowed to update J1 (vehicle category) or S1 (seating) themselves. Revenue checks every case against strict EU criteria (The EU criteria for N1 classification are outlined in Regulation (EU) 2018/858)

The Problem for Pre-2024 Conversions

Some pre-2024 conversions never met the EU N1 technical requirements (especially SUVs converted into 5-seat crew cabs). Councils accepted them as N1 goods vehicles, but Revenue will not. I’ve recently come across this exact scenario with a client of my own.

Now, when these vehicles resurface for sale, the VAT reclaim is open to challenge even where they are sold with N1 converstion certs, commercial logbooks and tax etc. Revenue may simply disallow the VAT reclaim on the basis that the vehicle is actually still a passenger car in their view.

BOTTOM LINE

The March 2024 rule change closed a loophole, but it also exposed the fragility of conversions done before then. If you’re buying a pre 2024 N1 conversion, approach with care. What looks like a bargain commercial could turn into a very expensive passenger car in Revenue’s books.

-Lisa