Changes to reliefs for business cars from April 2013
27th February 2013
With the forthcoming changes to capital allowances and tax deductible lease payments from April 2013, it will become more important for business to consider the cars used by the business and also whether it is more beneficial to own or lease business cars.
The changes to capital allowances will reduce the CO2 emissions thresholds below which 100% and 18% allowances can be claimed will be reduced from 110g/km to 95g/km and from 160g/km to 130g/km, respectively. While this will not impact on the allowances claimed on any vehicles purchased before April 2013, the number of vehicles on which 100% and 18% allowances can be claimed will be significantly reduced post March 2013. It is therefore worth considering bringing forward the purchase of any new vehicles into the period before April 2013 as it may be possible to accelerate the tax relief on any purchases.
For example, capital allowances of 100% can be claimed in the year of purchase on a BMW 116d Efficient Dynamics 3dr Sports Hatch with CO2 emissions of 99g/km, if purchased by 31 March 2013 (5 April 2013 for unincorporated businesses). If the same car is purchased from 1 April 2013 (6 April 2013 for unincorporated businesses) 18% writing down allowances are instead available.
Writing down allowances of 18% per annum can be claimed on a Honda Civic 1.8 i-VTEC SE 5dr Hatchback with CO2 emissions of 137g/km, if purchased by 31 March 2013 (5 April 2013 for unincorporated businesses). If the same car is purchased from 1 April 2013 (6 April 2013 for unincorporated businesses) 8% writing down allowances are instead available.
For leased cars the CO2 emissions below which 100% of lease payments are tax-deductible is also reducing. Currently for any leased cars with CO2 emissions above 160g/km 15% of the lease payments are disallowed for tax purposes. From April 2013 this threshold will reduce to 130g/km, regardless of the date the vehicle was first leased. When entering into any new lease agreements it is therefore worth considering whether the CO2 emissions of the vehicle will satisfy the current 160g/km threshold and impending 130g/km threshold.
For example, the Honda Civic 1.8 i-VTEC SE 5dr Hatchback, detailed above, is below the current 160g/km threshold, however 15% of lease payments from April 2013 will be disallowed as the CO2 emissions will be above the new 130g/km threshold.
For further information on this subject please contact David Morrison at firstname.lastname@example.org or Rachel Bell at email@example.com.