Acquisition of business cars

Purchase

 

Leasing

  • From April 2021 until April 2025 Companies purchasing zero emission cars 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 0-51g/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 51g/km and above must allocate the expenditure to a ‘special rate’ plant and machinery pool – where they will be able to write down only 6% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis.
 
  • 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 less than 51g/km 100% of the rentals are allowable.
  • For cars with CO2 emissions of 51g/km or above, 85% of the rentals can be deducted from a company’s 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

 

Leasing

  • The allowances when purchasing commercial vehicles (CV) are much more straightforward than those for cars.
  • For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments, this includes commercial vehicles.
  • 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) providing 100% relief for the first £1 million of a company’s expenditure on plant and machinery, including commercial vehicles. This is available until 31st December 2021.
 
  • 100% of the leasing/contract hire rentals of a CV are allowable against profits regardless of price or CO2’s of the vehicle

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