Capital Allowances and Cars

You will shortly be completing the first sets of accounts and Returns that include the changes announced in the last budget in respect of capital allowances on cars. This was in Budget Notice BN65.

As usual these changes cause further complications to an already complex area. The rules affect expenditure occurred after 1 April for corporate and 6 April for unincorporated businesses. You will all need to be aware of the changed rules as clients may ask about the tax position of any purchases they are thinking of making.

Firstly look at the CO2 emissions of any car that they are aiming to buy. If it is less than 110 gm/km then 100% allowances will be available. If the emissions are between 110 and 160 gm/km then the standard 20% will be due. But if the emissions are above 160 gm/km then the allowances reduce to 10%. These top level cars will need to be put in a separate pool for capital allowances purposes.

Other changes were brought in that affect leased cars. It also needs to be remembered that cars do not qualify under the AIA rules.