Tax relief on company cars
New rules have been introduced for expenditure incurred on cars on or
after 1 April 2009 for businesses in the charge to corporation tax and 6
April 2009 for businesses in the charge to income tax. From these dates,
expenditure on cars will be allocated to one of the two general plant
and machinery pools, depending on the cars' CO2 emissions. Expenditure
on cars with CO2 emissions over 160g/km will be dealt with in the
special rate pool and will attract WDAs at 10 per cent.
Cars that have an element of non-business use will continue to be dealt
with in a single asset pool to enable the private use adjustment to be
made, but for expenditure incurred from April 2009 onwards the rate of
WDA will be determined by the cars CO2 emissions.
Expenditure incurred before April 2009 will, in general, continue to be
subject to the old 'expensive' car rules for a transitional period of up
to five years. After this transitional period, any expenditure remaining
in a single asset pool will be transferred to the main capital
allowances pool.
The lease rental rules will also be replaced for leases commencing on or
after April 2009 with a flat rate disallowance of 15% for cars with CO2
emissions of 160g/km or more. This disallowance will only apply to one
lease rather than all links in a chain of leases.
Our view
These new rules reflect the government's stated intention of encouraging
use of more environmentally friendly modes of transport through fiscal means.
