Capital allowance on high CO2 cars and assets in special rate pool reduces to 6%

One of the capital allowance changes announced in the Autumn Budget was the reduction of the writing down allowance on assets in the special rate pool from 8% to just 6% per annum from April 2019.

The assets included in this pool include long life assets, such as aircraft, integral features within buildings and cars emitting more than 110g CO2 per kilometre.

A claim for the 100% AIA referred to above can be made for expenditure on these assets, (with the exception of motor cars) and this will result in faster tax relief.  This means that where a company buys a motor car that emits more than 110g CO2 per km it will take many years to get relief for the expenditure as even when the car is sold, the proceeds are deducted from the special rate pool and continue to be written down at 6% reducing balance.

For example:-

Global Ltd which makes up accounts to 31 March each year buys a new Mercedes E220d AMG line for the managing director Mr Global for £40,000.

As the CO2 emissions are 127g per km the WDA would be 8% for year ended 31 March 2019 = £3,200 leaving a tax written down value of £36,800.

The 6% WDA would then apply for year ended 31 March 2020 = £2,208 leaving £34,592.

If the car was sold for £25,000 in the following year then the remaining balance of £9,592 would continue to be written down at 6% per annum, hence a very long write off period.

It may be more tax efficient to lease such a vehicle as, although 15% of the lease rentals are disallowed for tax purposes for such high CO2 vehicles, this may nevertheless be more beneficial.

Note that the above rules operate differently where the motor car is acquired by a sole trader or a partner for his business as the car is not included in the pool and a balancing adjustment occurs when the car is sold.

Advisory Fuel Rate for Company Cars

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 December 2018. Where there has been a change the previous rate is shown in brackets.

Engine Size Petrol Diesel LPG
1400cc or less 12p   8p (7p)
1600cc or less   10p  
1401cc to 2000cc 15p   10p (9p)
1601 to 2000cc   12p  
Over 2000cc 22p 14p (13p) 15p 13p)

Note that for hybrid cars you must use the petrol or diesel rate.  You can continue to use the previous rates for up to 1 month from the date the new rates apply.

If you would like further help and advice on your company cars please call the team on 01733 371180.

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