With effect from 1 April 2009 for Corporation Tax and 6 April 2009 for Income Tax the rule restricting the amount of capital allowances for cars costing over £12,000 will be abolished and replaced with a system based on CO2 emissions.

The new rates available will be as follows;

* Expenditure on cars with CO2 emissions of 160g/km or below will be allocated to the plant and machinery pool and obtain 20% writing down allowance.
* Expenditure on cars with CO2 emissions above 160g/km will be allocated to the “special rate pool” and obtain 10% writing down allowances.
* Cars that have an element of non business use will continue to be dealt with in a single asset pool to enable private use adjustment to be made.

Expenditure incurred prior to April 2009 will generally continue to be subject to the current expensive car rules for a transitional period of up to 5 years.

From April 2009 the special rules that restrict the amount of lease payments that can be deducted for tax purposes for a car costing more than £12,000 will be reformed.

The restriction will be changed to a flat rate disallowance of 15% of relevant payments and apply only in respect of cars with CO2 emissions above 160g/km.

21st April 2009