Further details have been provided on the changes to the capital allowance treatment of cars. The changes will have effect from 1 April 2009 for corporation tax purposes and 6 April 2009 for income tax. The special rules that restrict the amount of capital allowances for cars costing more than £12,000 will be abolished.
- Expenditure on cars with CO2 emissions of 160gm/km or below will be allocated to the plant and machinery ‘pool’ (ie will obtain 20% writing down allowances (WDA)).
- Expenditure on cars with CO2 emissions above 160gm/km will be allocated to the ‘special rate pool’ (ie will obtain 10% WDA).
- 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 car’s CO2 emissions.
Expenditure incurred before April 2009 will, in general, continue to be subject to the existing ‘expensive’ car rules for a transitional period of around five years. Any expenditure remaining in a single asset pool (unless there is any non-business use of the car) will be transferred to the main capital allowances pool.
Please do get in touch if you would like more information on how these changes will affect you.