In April 2009, the rules on business car expenditure changed.
Old methods of accounting for company cars were replaced by new rules based on CO2 emissions.
The changes are fundamental. They could cost your business money if you make the wrong company car selection. So what changed?
Leasing cars: why it looks a good bet
The most important thing to note is how attractive car leasing has become. The old expensive car leasing disallowance (also known as the ‘half the excess rule’) has been replaced by a new car leasing disallowance. It’s based on CO2 emissions.
If you lease your business car and the emissions are below 161g/km, then the full amount of the net rental can be charged against the p&l account. That’s a significant advantage to a small business. Even for company cars with emissions above 161g/km, then 85% of the rental can be put against your company’s tax bill.
Writing down allowance changed as well
The other major change was to the method of writing down your company cars for the purposes of corporation tax. Again it’s now based on CO2 emissions. But whereas the full cost of the car could be accounted for when it was sold – the ‘balancing charge’ – the new company car accounting rules have abolished this. It means your business will have to continue depreciating the company’s cars for years into the future. Which, potentially, could have a significant impact on your cash flow.
Download our business car tax guide
Want to know more? Then all the details are included in our new guide to the tax rules on business cars. You can download it for free by clicking on this highlighted link The BIG tax change (PDF 518KB).
