Tax & Accounting News

New tax rules on way for car purchases

09/02/2009

Businesses considering investing in cars from April 2009 need to be aware of new capital allowances rules for tax relief on these vehicles, say Harris Lipman.

Key points of the new regime include:

• The 100 per cent first year allowance on cars with CO2 emissions of 110g/km or less remain up until 2013
• The restriction on annual tax allowances for “expensive cars” (those that cost more than £12,000) are abolished
• Cars with CO2 emissions not exceeding 160g/km and electric cars will qualify for a 20% annual tax allowance. This will also include cars first registered before 1 March 2001 that have no CO2 emissions data on their registration documents.
• Those with emissions above 160g/km will receive a 10% allowance as will cars registered on of after 1 March 2001 without an approved Co2 emissions figure.
• Cars costing up to and including £12,000 and purchased before either 1 April 2009 (for companies) or 6 April 2009 will receive a 20% allowance, regardless of emissions.  Cars costing more than £12,000 purchased before 1 or 6 April 2009 will each be subject to a separate calculation, subject to a 20% allowance. This will continue for a five-year transitional period.

Martina Fitzgerald, head of tax at Harris Lipman, said: “This is a complex area so businesses would certainly be wise to take expert advice on the most tax-efficient route for business expenditure on cars. For further information, please contact us.”