20 February 2017

Capital Allowances on Cars

Services:

Tax Reliefs (including R&D)

There are special rules for the treatment of certain distinctive types of expenditure such as capital allowances on cars.

When you buy assets that you keep to use in your business you can claim capital allowances which is a form of tax relief which allows you to deduct some or all of the value of the item from your profits before you pay tax.

The allowances available depend on what you are purchasing, such as:

  • equipment
  • machinery
  • business vehicles, eg cars, vans or lorries

In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA). However, you can’t claim AIA on cars, you can claim capital allowances on cars you buy and use in your business using what is known as writing down allowances.

 

What counts as a car?

For capital allowances a car is a type of vehicle that:

  • is suitable for private use - this includes motorhomes
  • most people use privately
  • wasn’t built for transporting goods

What doesn’t count as a car?

Because they don’t count as cars you can claim AIA on:

  • motorcycles - apart from those bought before 6 April 2009
  • lorries, vans and trucks

Capital Allowance Rates for cars

The treatment of car expenditure depends on:

  • When it was acquired and...
  • The CO2 emissions of your car.

Capital allowance rates for cars by year and by emissions can be found below. The main and special rates apply from 1 April for limited companies, and 6 April for sole traders and partners. The first year allowances rate applies from 1 April for all businesses.

 

Capital allowance on Cars bought from April 2015

Description of car What you can claim
New and unused, CO2 emissions are 75g/km or less (or car is electric) First year allowances
New and unused, CO2 emissions are between 75g/km and 130g/km Main rate allowances
Second hand, CO2 emissions are 130g/km or less (or car is electric) Main rate allowances
New or second hand, CO2 emissions are above 130g/km Special rate allowances

 

Capital allowance on Cars bought between April 2013 and April 2015

Description of car What you can claim
New and unused, CO2 emissions are 95g/km or less (or car is electric) First year allowances
New and unused, CO2 emissions are between 95g/km and 130g/km Main rate allowances
Second hand, CO2 emissions are 130g/km or less (or car is electric) Main rate allowances
New or second hand, CO2 emissions are above 130g/km Special rate allowances

 

Capital allowance on Cars bought between April 2009 and April 2013

Description of car What you can claim
New and unused, CO2 emissions are 110g/km or less (or car is electric) First year allowances
New and unused, CO2 emissions are between 110g/km and 160g/km Main rate allowances
Second hand, CO2 emissions are 160g/km or less (or car is electric) Main rate allowances
New or second hand, CO2 emissions above 160g/km Special rate allowances

 

Using cars outside your business

Sole traders and partners

If you’re a sole trader or partner and you also use your car outside your business, calculate how much you can claim based on the amount of business use and claim simplified mileage expenses on business vehicles instead.

Employees

If you’re an employee you can’t claim capital allowances for cars, motorbikes and bicycles you use for work, but you may be able to claim for business mileage and fuel costs.

Claim tax relief on company car

Companies and unincorporated businesses can make tax relief claims for capital allowances on cars through tax returns. With careful tax planning it is possible to benefit from restricting claims to avoid other allowances or tax reliefs being wasted. If you are a company owner please get in touch to discuss your options. Please note, for companies the claim must normally be made within two years of the end of the accounting period.

Capital Allowances on Cars - How we can help

Our accountants in Grimsby work across Lincolnshire and we can help by computing the allowances available to your business, ensuring that the most advantageous claims are made and by advising on matters such as the timing of purchases and sales of company cars. For more information how we can help with tax relief on company cars please call 01472 355215, email grimsby@hwca.com or get in touch via our online form.

Read more: https://www.hwca.com/files/factsheets/capital_allowances.pdf

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