Income Tax (Trading and Other Income) Act 2005

Car or motor cycle hire U.K.

48 Car or motor cycle hire U.K.

(1) This section applies if, in calculating the profits of a trade, a deduction is allowed for expenses incurred on the hiring of a car or motor cycle—

(a) which is not a qualifying hire car or motor cycle (see section 49(2)), and

(b) the retail price of which when new exceeds £12,000.

(2) The amount of the deduction which would otherwise be allowable is reduced by multiplying the amount by the fraction—

where RP is the retail price of the car or motor cycle when new.

(3) Subsection (4) applies if the deduction is reduced as a result of subsection (2) and subsequently—

(a) there is a rebate (however described) of the hire charges, or

(b) a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency arrangement.

(4) The amount that, as a result of the rebate or release—

(a) is brought into account as a receipt of the trade under section 97 (debts incurred and later released), or

(b) is treated as a post-cessation receipt under section 249 (debts released after cessation),

is reduced by multiplying it by the fraction in subsection (2).

(5) The power under section 74(4) of CAA 2001 to increase or further increase the sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power to increase or further increase the sum of money specified in subsection (1)(b) or (2).

49 Car or motor cycle hire: supplementary U.K.

(1) In section 48 “car or motor cycle” means a mechanically propelled road vehicle other than one—

(a) of a construction primarily suited for the conveyance of goods or burden of any description, or

(b) of a type not commonly used as a private vehicle and unsuitable for such use.

(2) In section 48 “a qualifying hire car or motor cycle” means a car or motor cycle which—

(a) is hired under a hire-purchase agreement (see subsection (3)) under which there is no option to purchase,

(b) is hired under a hire-purchase agreement under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1% of the retail price of the car when new, or

(c) is a qualifying hire car for the purposes of Part 2 of CAA 2001 (under section 82 of CAA 2001).

(3) For this purpose “hire-purchase agreement” means an agreement under which—

(a) goods are bailed or (in Scotland) hired in return for periodical payments by the person to whom they are bailed or hired, and

(b) the property in the goods will pass to that person if the terms of the agreement are complied with and one or more of the following events occurs,

but does not include a conditional sale agreement (see subsection (5)).

(4) The events are—

(a) the exercise of an option to purchase by that person,

(b) the doing of any other specified act by any party to the agreement, and

(c) the happening of any other specified event.

(5) A “conditional sale agreement” means an agreement for the sale of goods under which—

(a) the purchase price or part of it is payable by instalments, and

(b) the goods are to remain the property of the seller (even though they are to be in the possession of the buyer) until specified conditions as to the payment of instalments or otherwise are met.

(6) In this section and section 48 “new” means unused and not second-hand.

50 Hiring cars (but not motor cycles) with low carbon dioxide emissions U.K.

(1) Section 48 does not apply to expenses incurred on the hiring of—

(a) a car with low CO2 emissions, or

(b) an electrically-propelled car.

(2) For this purpose—

• “car with low CO2 emissions” has the meaning given by section 45D of CAA 2001, and

• “electrically-propelled car” has the meaning given by that section.

(3) This section does not apply to expenses incurred on the hiring of any such car—

(a) under a contract entered into after 31st March 2008, or

(b) for a period of hire which begins after that date.