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20 August 2009 |
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Business cars and tax – post April 2009
From the 6 April 2009 (1 April 2009 Companies) the full impact of a complete overhaul of tax allowances granted to purchasers of company cars comes into effect.
The aim of the changes is to encourage the use of CO2 effective cars.
The rates of tax allowance available, based on CO2 emissions, are:
• New cars emitting no more than 110g/km will attract a 100% first year tax allowance.
• Cars emitting no more than 160g/km (including second hand low emission cars) are to be included in the main plant and machinery pool, attracting writing down allowance of 20%.
• Cars emitting more than 160g/km will be added to the special rate pool, and thus will attract writing down allowance at a rate of 10%.
The overall effect of these changes is to slow down the rate of write off for tax purposes, and the bigger less CO2 efficient cars will be the worst affected
Company Car purchasers
Companies who buy cars should be aware that when a vehicle is sold any balancing allowance, the difference between the tax written down value and the proceeds of sale, will no longer be available in the year in which the vehicle is sold. The proceeds are deducted from the relevant pool of expenditure and written off at the 20% or 10% rate.
This issue does not affect sole traders and partnerships as each vehicle with private use is kept in a separate pool.
Motorcycles
Until 31 March 2009 motorcycles were classified as cars for capital allowance purposes and thus did not qualify for the Annual Investment Allowance. That has now been reversed and from 1 April (6 April for income tax businesses) motorcycles are ordinary plant and machinery and will qualify for the 100% Annual Investment Allowance. (Up to the £50,000 combined expenditure limit.)
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