CA23153 - PMA: FYA: Expenditure on cars with low carbon dioxide emissions

CAA01/S45D

Businesses of all sizes can claim 100% FYAs on capital expenditure on a car provided that:

• the car is "unused and not second hand", and is first registered on or after 17 April 2002;
• it is an electric car, or
• a car with CO2 emissions of not more than 120gm per km driven.
• the expenditure is incurred between 17 April 2002 and 31 March 2008.

New cars are "unused and not second hand". You should accept a car is unused and not second hand even if it has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser, or used as a demonstration car. A car's carbon dioxide emissions figure is shown on the vehicle registration document (the "V5"). Emissions figures for most makes and models can be obtained from the:

• Inland Revenue's intranet site for CO2 emissions;
• Vehicle Certification Agency's website at www.vca gov.uk.

Detailed guidance on this scheme can be found under specialist publications in the Practitioner Zone on the Inland Revenue Internet site.

The definition of a car follows the normal meaning in CAA01/S81 ( CA23510). Expenditure on a taxicab can also qualify for 100% FYAs if the cab meets the conditions above, even if it is not a car within the meaning of Section 81.

The legislation is in FA02/S59 and FA02/SCH19 which inserts a new Section 45D into CAA01.

Changes to the rules for cars costing more than £12,000

The special rules for cars that cost more than £12,000 ( CA23520) do not apply to qualifying cars with low CO2 emissions. This means the annual writing-down allowances are not restricted to £3,000, and there is no restriction to the car hire or leasing expenses a business can deduct for tax purposes.