100% Capital Allowances extended for green cars

100% Capital Allowances extended for green cars

In the 2016 Budget the Chancellor announced that capital allowances for low emission company cars will be extended.

If your company buys a car which is used for business purposes by an employee, it can claim a tax deduction by way of capital allowances. The rate of capital allowances available will depend on the car’s CO2 emissions. The rates that apply for 2016/17 and 2017/18 are as follows:

CO2 less than 75g/km 100% capital allowances
CO2 between 75g/km and 130g/km 18% capital allowances
CO2 greater than 130g/km 8% capital allowances

Therefore if a company buys a car with a CO2 less than 75g/km it can claim to set off the whole cost of the car against its profits in the financial period in which the car is acquired. The car must be brand new and unused (apart from delivery mileage).

The 100% capital allowance rate for low emission cars was due to end on the 31 March 2018, however the Chancellor extended the 100% rate until 31 March 2021.

However, for low emission cars purchased after 31 March 2018 (and before 1 April 2021) the 100% capital allowance rate will only apply where the car has emissions of less than 50g/km.

In addition, from 1 April 2018, the emission threshold for the 18% capital allowance rate will also be cut from 130g/km to 110g/km.

In view of the impending changes, consider bringing forward the replacement of your company cars to take advantage of the current more generous rate of capital allowances which will apply up to 31 March 2018. There is a fairly wide range of low emission cars on the market, some of which include high performance vehicles from manufacturers such as; BMW, Mercedes, Porsche, Tesla, Jaguar, Lexus and Audi.

If you would like more information, or would like to discuss your tax affairs in general, please contact our Tax Partners Steve Crompton or Chris Barrington on the details below:

Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
email: steve.crompton@jsllp.co.uk

Chris Barrington
Tax Partner
direct dial: 01942 292505
mobile: 07730 436070
email: chris.barrington@jsllp.co.uk