Chapter 8: Cars, etc.
Overview
363.This Chapter makes special provisions for cars (and motorbikes) costing over £12,000. It includes definitions which are used for other sections in Part 2.
364.The Chapter:
requires a single asset pool for expenditure over £12,000 on a car (other than a qualifying hire car) (section 74);
restricts writing-down allowances to a maximum of £3,000 a year (section 75);
restricts writing-down allowances further if part of the expenditure is met by another person, the car is use only partly for the qualifying activity, or there is a depreciation subsidy (sections 76 to 78);
makes additional provision for the disposal value if:
a person ceases to own a car in a transaction within Chapter 17; or
an employee or office-holder has claimed capital allowances for some years and for other years used the administrative fixed profit car scheme instead.
365.Sections 81 and 82 define “car” and “qualifying hire car” for the purposes not just of this Chapter but for Part 2 generally.
Section 74: Single asset pool
366.This section is based on section 34(1) and (2) of CAA 1990. It deals with cars costing in excess of £12,000. Qualifying expenditure on them must be allocated to a single asset pool (if allocated to a pool at all). Section 54 introduces single asset pools.
Section 75: General limit on amount of writing-down allowance
367.This section is based on section 34(3) of CAA 1990. It limits the writing-down allowance on a car above the £12,000 cost threshold to £3,000 a year.
368.Subsection (3) lists other provisions of this Chapter that may limit further the amount of the writing-down allowance.
Section 76: Limit where part of expenditure met by another person
369.This section is based on section 34(3)(b) of CAA 1990. It restricts allowances if part of the expenditure on the car is met by another person or persons.
370.The limit of £3,000 on writing-down allowances is restricted further for both the recipient of the contribution and the contributors (if they are entitled to plant and machinery allowances). Each is limited to a proportion of the £3,000 limit according to how much of the expenditure on the car they met. The total writing-down allowances due to all parties cannot exceed £3,000 a year.
371.Subsections (3) and (4), unlike section 35(1) of CAA 1990, do not create special pools for contributions to expenditure on expensive cars. This is not required because of the way Part 11 handles contributions. See Note 19 in Annex 2, and the related Change 60 in Annex 1.
Section 77: Car used partly for purposes other than those of qualifying activity
372.This section is based on section 34(5) of CAA 1990. It deals with cars that are partly used for purposes other than those of the qualifying activity.
373.There is no disposal event when a car within this Chapter begins to be used in this way. So the single asset pool under this Chapter takes the place of the single asset pool which would otherwise be required by Chapter 15. But the rules in this section are similar to those in Chapter 15 as regards the just and reasonable reduction to any allowances and charges.
374.Subsection (1) provides that no balancing allowance or charge arises when the car begins to be used partly for purposes other than those of the qualifying activity. See Note 20 in Annex 2.
375.Subsection (4) deals with calculation of unrelieved qualifying expenditure carried forward. In saying that any reduction of a writing-down allowance under this section is to be disregarded, this subsection goes further than section 34(5) of CAA 1990. See Note 21 in Annex 2
Section 78: Effects of partial depreciation subsidy
376.This section is based on section 34(5) of CAA 1990. It deals with partial depreciation subsidies made in respect of cars over the cost threshold. Much as with section 77, it takes the place of Chapter 16 for cars, but otherwise has similar effect.
377.Subsection (3) deals with calculation of unrelieved qualifying expenditure carried forward. In saying that any reduction of a writing-down allowance under this section is to be disregarded, it goes further than section 34(5) of CAA 1990. See Note 21 in Annex 2.
Section 79: Cases where Chapter 17 (anti-avoidance) applies
378.This section is based on section 34(4) of CAA 1990. It deals with cases in which a car is disposed of in a transaction within Chapter 17. The intention when this legislation was introduced was to prevent artificial acceleration of allowances for cars over the cost threshold by disposal events between connected persons.
Section 80: Vehicles provided for purposes of employment or office
379.This section is based on section 27(2A) to (2E) of CAA 1990. It gives plant and machinery allowances to employees and office-holders on a car or cycle they use partly for “business travel”. There is a minor change.
380.The general rule in section 36 is that employees and office-holders have qualifying expenditure only for plant or machinery “necessarily provided for use in the performance of the duties”. This rule is relaxed to include expenditure on cars and cycles partly for use as in subsection (2) – what is generally known as “business use”. This includes a minor change to align the legislation for capital allowances with that for expenses in ICTA. See Change 18 in Annex 1.
381.Subsection (3) limits the balancing allowance an employee or office-holder is entitled to if they have:
in some years claimed capital allowances on a car or cycle; and
in other years made use instead of the administrative arrangements (for example the fixed profit car scheme) which give tax relief without claims.
Section 81: Extended meaning of “car”
382.This section is based on section 36(1)(a) and (b) of CAA 1990. It defines “car” for the purposes of this Part.
383.Other references to car include sections 46 (general exclusion 2 from first-year qualifying expenditure), 84 (short-life assets treatment ruled out) and 96 (cars are not long-life assets).
Section 82: Qualifying hire cars
384.This section is based on section 36 of CAA 1990. It defines “qualifying hire cars”. These are not subject to the provisions of this Chapter.
