Capital allowances on cars

HMRC have issued some draft legislation and guidance on how the tax relief on business cars, known as capital allowances, will be calculated from April 2009. The new rules apply to expenditure incurred on or after 6 April 2009 (1 April 2009 for companies). The 100% immediate write off for expenditure on cars with CO2 emissions of 110 gm/km or less remains but the old expensive car rules are abolished. The rate of annual writing down allowances for expenditure on other cars will be determined by the car’s CO2 emissions. The new rules provide that expenditure on cars with CO2 emissions:

• not exceeding 160gm/km will be pooled in the main 20% pool: and
• over 160gm/km will be pooled in the 10% pool.

The legislation is draft at present and we will keep you informed of developments. Meanwhile do get in touch if you are planning significant expenditure in this area. Source: Treasury note