Tax Allowances for Company Cars

Acquisition of business cars

Purchase

Leasing

• The expenditure on all business cars is now treated in three ways, depending on the CO2 emissions of each vehicle. Diesel and petrol engine vehicles will be treated the same way. From 2018:

• Companies purchasing cars with emissions of 50g/km or below are able to write down the full cost of these vehicles against their taxable profits in the first year of ownership

• Companies purchasing cars with emissions between 51g/km and 110g/km must allocate the expenditure to the general plant and machinery pool - where they will be able to write down 18% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis

• Companies purchasing cars with emissions of 111g/km and above must allocate the expenditure to a 'special rate' plant and machinery pool - where they will be able to write down only 8% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis

• The percentage of leasing and contract hire payments that are allowable against a companies profits have improved considerably since the changes introduced in April 2009.

• Quite simply for cars with CO2 emissions of 110g/km or less 100% of the rentals are allowable
• For cars with CO2 emissions greater than 110g/km, 85% of the rentals can be deducted from a companies taxable profit.

• "From a purely financial standpoint it looks as if leasing could become the dominant method of funding for most cars" Dan Rees, Business Car Consultant, Deloitte & Touche

Tax Allowances - Commercial Vehicles

Purchase

Leasing

• The allowances when purchasing commercial vehicles (CV) are much more straightforward than those for cars.

• Irrespective of the price or CO2's of the CV they are placed in the general plant and machinery pool and written down at 18% per annum on a reducing balance basis. In other words in the first year 18% of the price paid for the CV is allowable against profits

• It is worth noting that there is an annual investment allowance (AIA) for the first £1 millon of a company's expenditure on plant and machinery each year. This is a temporary increase to the allowance, which is usually much lower, from 1 January 2019 to 31 December 2020.

• 100% of the leasing/contract hire rentals of a CV are allowable against profits regardless of price or CO2's of the vehicle