Capital Allowances cars and vans

Temporary First Year Allowance

The Finance Bill 2009 will include a temporary 40% first year allowance (FYA) for expenditure on plant and machinery that would normally be allocated to the main  capital allowance pool.

The temporary FYA will apply to expenditure incurred in the 12 month period beginning 1 April 2009 by companies and 6 April 2009 by the self-employed  and partnerships. The 40% FYA will be claimed after the claim for Annual Investment Allowance of £50,000.

 
Cars/Vans

From 1 April 2009 for company owned cars and from 6 April 2009 for the self-employed in respect of  cars used wholly for business use, expenditure will be allocated to one of the two general plant pools:

• The general pool - 20% allowance for cars with CO2 emissions of up to 160g/km.
• The special rate pool -10% allowance for cars with CO2 emissions above 160g/km.

The rules restricting the amount of capital allowances for cars costing more than £12,000 have been abolished for cars acquired from April 2009. Expenditure incurred before April 2009 will continue to be subject to the old "expensive" car rules for a transitional period of around 5 years. After this period any expenditure remaining in a single asset pool will be transferred into the general pool.

There is a 100% first year allowance available to purchasers of fuel efficient cars which either:

• emit no more than 110g/km of CO2 or
• are electrically propelled.

When this type of car is purchased it will be added to the general pool.

Cars owned by the self-employed and used for business and non-business purposes will continue to be dealt with in a single asset pool.

Vans will go into the general pool and the Annual Investment Allowance will be available to claim against the cost. The definition of a van is a vehicle primarily suited to the carriage of goods, or it is of a type not commonly used as a private vehicle and not suitable for such use. This means that if a van has any private use it would fail the second part of the test (this would most likely apply to a double cab pick up). This is a different definition to the VAT or benefit in kind definition.

If you are planning capital expenditure over the next 12 months the timing will be critical depending on your year end, so please do not hesitate to contact us for advice.

May 2009