Capital Allowance changes ahead

  • By Mark Morton
  • 20 September 2017 00:00

How many of you remember the old expensive car rules and the £12,000 limit? Time flies when you are having fun! We have had a system for capital allowance for some years now that allow capital allowances on cars by reference to the CO2 emissions.

Expenditure on cars with CO2 emissions:

  • not exceeding 130 gm/km are pooled in the main pool: and
  • over 130 gm/km pooled in the special rate pool.

Changes are to be made made to the tax relief for business expenditure on cars for expenditure incurred on or after 1 April 2018. Expenditure on cars with CO2 emissions:

  • not exceeding 110gm/km will be pooled in the main pool: and
  • over 110gm/km pooled in the special rate pool.

This is interesting as the last change reduced the limit from 160 to 130gm/km. For many mainstream business vehicles this did not make much difference as many standard 2 litre saloon vehicles were under 130gm anyway. However, the change next year may affect more users as there are a number of 2 litre saloon vehicles which will struggle with the 110gm limit.

In addition, the 100% first year allowance for expenditure on cars will be reduced from cars with CO2 emissions of 75gm/km or less to only 50gm, again for expenditure incurred on or after 1 April 2018. Again, there are not many vehicles which meet the 75gm test and even fewer which meet the 50 gm but not identifying the change could be costly.

Finally, the reduction in the emissions threshold from 130 to 110gms/km will not apply to expenditure incurred under car hire contracts entered into before 1 April 2018 (corporation tax) or 6 April 2018 (income tax) for the purposes of the lease rental restriction.

The answer to all of this of course is to get a double-cab pick-up instead!

You may wish to make clients aware of these changes sooner rather than later as they look change their cars in the New Year.

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