Consultations and Proposals

Modernising Tax Relief for Business Expenditure on Cars

In the 2006 Budget, the Government launched a consultation on modernising tax relief for business expenditure on cars. This proposed replacing the existing capital allowance rules that apply to cars costing over £12,000, with a range of first-year capital allowances based on CO2 emissions, with the balance of unrelieved expenditure being taken to a new car pool with lower writing down allowances than the general pool.

An update was published in March 2007 in which views were sought on a refined proposal that utilised two pools, the general plant and machinery pool and a lower rate pool, and introduced a threshold for emissions. The pool to which expenditure would be allocated would depend on whether or not the CO2 emission levels were above or below the threshold.

The update document also sought views on proposals to reform the lease rental restriction utilising the same emissions threshold and applying a uniform fixed percentage disallowance on relevant payments on cars with emissions above the threshold.

The summary of responses is available here:

http://www.hm-treasury.gov.uk/media/5/2/pbr_csr07_cars248.pdf