Tax Chat - Cars - the business side

As explained last week, each year the Budget announces what updates are to be made to various rates, bands and thresholds for taxing purposes.  Last week we identified the substantial increases in P11D benefit percentages that were to be applied to zero and low emission cars and which therefore could impact those making use of a company car.

This week we now turn to the business side and have outlined below the threshold changes that will impact on the level of capital allowances available.

Currently businesses can claim capital allowances on cars purchased for the purposes of their business, whether this be through a sole trader, company or partnership structure. The level of capital allowances available throughout the period of ownership is determined by the Co2 emissions of the car purchased.  Therefore, unlike P11D benefits in kind where the percentage applied is subject to change throughout the period of ownership, business have more certainty as the percentage they can claim each year is determined at the date of purchase. 

This therefore gives business the opportunity to choose to accelerate their car purchase to before 1 April 2013 and increase their annual capital allowances claim.  The threshold changes are outlined below:

To 31 March 2012 :  0 – 110g/km  - 100%           From 1 April 2013 :  0 – 95g/km  - 100%
111 - 160g/km - 20%                                          96 - 130g/km - 20%
161g/km plus – 10%                                          131g/km plus – 10%


Also expensive leased cars (those with a list price >£12,000) are currently subject to a 15% disallowance on annual lease costs if the car’s Co2 emissions exceed 160g/km.  For such cars purchased after 1 April 2013 the threshold above which the 15% rate applies drops to 130g/km.
We therefore advise that you take a few minutes to consider if your business will need to purchase a car over the next year or two.  If so, and if the change to Co2 emission thresholds may impact on the level of tax relief available to your business, talk to us now so we can help advise on the timing of the purchase.

If you would like to discuss this further, or if you have any questions, please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk