Treasury downplays BVRLA capital allowance claim
24 June 2008
Author: Tom Webster
Changes to capital allowances will not be applied to cars registered before April 2009, according to the BVRLA.
The BVRLA claims to have seen an internal Treasury document that confirms "these measures will only affect new cars in 2009".
However, when BusinessCar put the points to the Treasury, a spokesman maintained a final decision has yet to be set.
"As stated in Budget 2008 the measure will apply to qualifying expenditure on business cars incurred on or after 1 April 2009 (for corporation tax) or 6 April 2009 (for income tax)." said the official. "There are a number of issues surrounding cars purchased and leased under the existing arrangements and some transitional arrangements will be needed - the full details of these will be set out in the final legislation."
The spokesman added there would be draft legislation published later this year "alongside a technical document that will provide further explanation of the detail". This draft would give people the chance to comment on the legislation.
Neal Francis, boss of Pendragon leasing, said: "We welcome the BVRLA's clarification that we believe was the only real way forward, but we would encourage all fleets to restructure their fleet policies now, and await the manufacturers to inevitably catch up with lower CO2 emitting vehicles, which we understand are already well under development."
The capital allowances - or writing down allowances - changes were announced in the 2008 Budget, but did not make exactly clear which vehicles would be covered by the changes. This led to many experts predicting a rise the contract hire costs of cars above 160g/km.
The changes mean that company cars are banded by CO2 emissions rather than purchase price when it comes to reclaiming tax on the depreciation.