SE31850 - Travel expenses: general - employees using own car for work - statutory basis - rental, lease or hire payments

Section 35(2) CAA 1990

Important note:

From 2002/03 the rules described below have changed. There is a new statutory mileage allowance relief rate that is used to calculate tax relief that employees can get for using their own vehicles for work. Employees are no longer entitled to deduct actual costs (the exact method) or to use the non-statutory authorised mileage rates (the simple method). There is detailed guidance on the new scheme at SE31330 onwards.

2001/02 and earlier

This page only applies where the exact, statutory method is being used to calculate the cost of business motoring (see SE31845).

Where expenditure is incurred on hiring a car, you must restrict the rental available for relief if the retail price of the car when new exceeds £12,000. So only a proportion of the rental can be allowed, even if the car is wholly used for business.

Under Section 35(2) CAA 1990 you allow that proportion of the rental which £12,000 plus half the excess of the retail price over £12,000, bears to that price. (See example SE31906). This limit applies to expenditure on the hiring of a car under a contract entered into after 10 March 1992. The previous limit was £8,000.