Capital allowances cut along with emission thresholds

HM Treasury has confirmed that the previously announced reduction in the main rate of capital allowances on plant and machinery, which includes vans and cars, will come into effect for the 2012/13 financial year with rates frozen for 2013/14.

 

While continuing to adhere to the system introduced in 2009, which offers enhanced rates for lower emission vehicles, and the separation of vehicles into three pools depending on their emissions, the Government is lowering the rates of reclaim by 2% on vehicles with emissions above 110g/km.

 

Companies purchasing cars with emissions of 110g/km or below can continue to write down the full cost of vehicles against their taxable profits in the first year of ownership

 

Companies purchasing cars with emissions between 111g/km and 160 g/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 vehicles against their taxable profits each year, on a reducing balance basis (previously 20%).

 

Companies purchasing cars with emissions of 161 g/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 vehicles against their taxable profits each year, on a reducing balance basis (previously 10%).

 

Cars already on-fleet prior to the April 2009 change to an emissions-based structure will continue to be administered under the previous price based system until disposal under transition period rules.

 

The reductions in capital allowance rates were first announced by the coalition Government’s 2010 Budget Statement.

 

However, the Chancellor has also announced further changes in capital allowances business car rules, which will become effective in 12 months time.

 

From April 2013, the Government will extend the 100% first year allowance for businesses purchasing low emissions cars for a further two years toMarch 31, 2015.

 

Simultaneously it will reduce the carbon dioxide emissions threshold below which cars are eligible for the first year allowance from 110 g/km to 95 g/km, and leased business cars will no longer be eligible for the first year allowance.

 

Additionally, the carbon dioxide emissions threshold for the main rate of capital allowances for business cars will reduce from 160 g/km to 130 g/km. The threshold above which the lease rental restriction applies will also reduce from 160 g/km to 130 g/km.

 


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