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Purchasing a car for the business?


If you are thinking of buying a new car for the business, then whether you buy the car before or after April 2009 could have a significant effect on the annual capital allowance available to the business and ultimately the business tax bill.

It is proposed that from April 2009 the annual capital allowances are to be dependent on the level of CO2 emissions for the car rather than just the cost. If the business operates through a company the changes come into effect on 1st April 2009, whereas the changes come into effect on 6th April 2009 for other businesses.

The proposals suggest that cars below 110 gm/km will continue to be entitled to a full 100% first year allowance, between 110-160 gm/km will get an annual allowance of 20% whereas cars in excess of 160 gm/km will only qualify for 10% in a special rate pool.

The proposals add further complexities to already complex rules, making it more difficult for business owners to make informed decisions. For example, businesses purchasing cars costing more than £30,000 and over 110 g/km CO2 may well be able to claim higher allowances if they acquire the car after April 2009. However if the car is likely to fall drastically in value and perhaps not be owned for too long, then purchasing it before April 2009 could be much more beneficial. Although if the business is not a company, and the business owner is likely to use the car for private purposes, then purchasing the car after April 2009 may be more beneficial, but not necessarily. If the car emissions are 110 g/km or lower the date the car is purchased may well only depend upon when the business accounting year end is.