SE36791 - Deductions from emoluments: capital allowances: particular items of machinery or plant: motor vehicles and bicycles: special rules for calculating balancing allowances: transitional arrangements for 2001/02 only

Section 80(3) CAA 2001 and Section 59(4) FA 2001

Remember that employees cannot claim capital allowances for a car, van, motor cycle or bicycle after 5 April 2002 (see SE36520). This applies to all kinds of capital allowance, including balancing allowances.

Disposals in 2001/02

If an employee has been claiming capital allowances on a motor vehicle or bicycle and, in 2001/02, they either dispose of it or stop using it for work, they will be subject to a balancing allowance or a balancing charge in the normal way (see SE36680). The '2000/01 and earlier' rules in SE36790 will apply. See example SE36935.

Vehicles and bicycles still used for work at 5 April 2002

As part of the rules governing the introduction of mileage allowance relief, motor vehicles and bicycles which an employee was still using for work at 5 April 2002 are to be treated as if they were sold on that date for an amount equal to their open market value. This means that, strictly speaking, a balancing allowance or balancing charge will arise in 2001/02 in all cases where

• an employee has been claiming capital allowances for their car, van, motor cycle or bicycle, and
• the vehicle or bicycle is still being used for work at 5 April 2002.

Some employees may claim a balancing allowance for 2001/02, or return a balancing charge, on that basis. Others may simply claim a 25% writing down allowance as they have done in other years. Ministers have agreed that, for 2001/02, claims made on either basis can be accepted. You must not insist that an employee uses the strict statutory basis outlined above.