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Tax Allowances

Acquisition of business cars

Purchase

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.

Companies purchasing cars with emissions of 95g/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 96g/km and 130g/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 131g/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

Leasing

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 130g/km or less 100% of the rentals are allowable

For cars with CO2 emissions greater than 130g/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

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 £500,000 of a companies expenditure on plant and machinery each year. Depending on what plant and machinery has been purchased in the current year this could mean you can write off the full cost of a CV in year one.

Leasing

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

Balgores are affiliated to the BVRLA