The treatment of Corporation Tax on business cars from April 2009 changes.
These alterations to writing down allowances have now been clarified.
The British Vehicle Rental & Leasing Association (BVRLA) has confirmed that the new rules will only be applied to new vehicles on or from 01 April 2009. There will be no retrospective treatment.
“This is in accord with the original Budget announcement. Any other interpretation of commencement can only be viewed as uninformed,” commented John Lewis, director general, BVRLA.
There are two main changes to the Corporation Tax treatment of business cars.
From 01 April 2009, Corporation Tax relief for company cars will depend on their CO2 emissions:
- up to 160g/km;
- and 161g/km and above
These two figures will become key benchmarks.
The 20% writing down allowance rate (for cars between 111g/km-160g/km) and 10% writing down allowance rate (above 160g/km) are lower than the 2007-08 rate of 25%.
Cars in the 111g/km-160g/km category will be pooled with general machinery; those cars in the higher emission category will go into a special pool with a 10% writing down allowance on a reducing basis.
The current 2008-09 rate of capital allowances is 20%.
What effect will this have on business cars?
Nigel Morris from accountancy firm Deloitte said: “There will be a big difference to the cost to the company of a car with emissions of 161g/km compared to one with 160g/km.
“The changes will affect all users of company cars. If the car is leased, the leasing company will be affected by these changes and will pass any additional costs on to the person leasing the car.”
The Corporation Tax changes commence from 01 April 2009.
Further information
- Go to our Advice Centre for the current Corporation Tax rules in What is Corporation Tax?
Fundamental changes to tax treatment of business cars from 2009
