30 |
increasingly common leasing arrangement whereby a (new) car is leased to a person for 2 or 3 years; however, cars leased to persons receiving mobility allowance are treated favourably.272 |
24A.2.10.2 Restricted Allowances on ‘Expensive’ Motor Cars |
| Expenditure on cars outside the above categories and costing more than £12,000 is pooled separately from other assets, but forms one single pool.273 These restrictions do not apply to cars with low carbon dioxide emissions and electric cars.274 Other changes exclude the restrictions on the hire costs of cars in TA 988, section 587A for such vehicles. The 31 March 2008 sunset applies here also. |
| Where the capital expenditure on a car exceeds £12,000, each car is treated as a separate asset and the allowance is limited to a maximum of £3,000 (ie 25% of £12,000). The effect of the £3,000 limit is to defer the benefit of the relief. The figures of £3,000 and £12,000 are reduced or increased proportionately if the chargeable period is less or greater than 12 months.275 |
Further rules apply where a part of the expenditure is met by another person, the car is used partly for a non-qualifying activity or there is a partial deprecation subsidy.276 There are also further rules where what the Act calls the anti avoidance rules in the sections on finance leases etc apply.277 |
When a car costing more than £12,000 is leased, further special rules apply to restrict the relief normally given in computing profit for hiring charges;278 this means a new section in TA 1988 and not as previously in CAA. These special rules do not apply where the car is subject to a hire purchase agreement under which the hirer has an option to buy the car for an amount equivalent to 1% (or less) of the retail price of the car when new.279 The amount paid by way of rent is reduced in the proportion which the £12,000, plus half the amount by which the retail price of the vehicle when new exceeds £12,000, bears to that retail price. Thus, if a car cost £18,000 new and the rent is £5,600, the amount claimable for tax is (£12,000 (£18,000–12,000)/2)/£18,000 or 5/6 £5,600 £4,666. The missing 1/6 will never qualify for relief. |
The restrictions on the hire costs of cars in TA 1988, section 587A does not apply to cars with low carbon dioxide emissions and electric cars.280 The 31 March 2008 sunset applies here also. |
24A.2.11 Hire Purchase |
Where plant or machinery is purchased by the taxpayer, T, on hire purchase or conditional sale contracts, first year and writing down allowances may be claimed in respect of the capital element.281 The plant or machinery is treated as belonging to T and to no one else provided |