100% Capital Allowances on Cars?

Capital Allowances and 100% deductions under the Annual Investment Allowance (AIA) have been with us for some time now and whilst you can claim AIA on most items of plant and machinery, AIA isn’t available on cars.

However, within the Capital Allowances regime are First Year Allowances (FYA), and where an asset qualifies for FYA you can deduct the full cost against profits by claiming 100% allowance in the year of acquisition. FYAs are claimed in addition to AIA – they don’t count towards your AIA limit.

What qualifies: To encourage green investment, ‘enhanced capital allowances’ (a type of First Year Allowance) are available for certain energy saving and water efficient equipment that is on the published energy technology and water efficient technologies product list.

Perhaps surprisingly however, you can also claim FYAs on some cars with low CO2 emissions. 100% FYAs are available on new and unused cars where CO2 emissions are 75g/km or less, or the car is electric.

In the past, ‘low emission’ cars have been fairly limited and have included the Toyota Prius and Nissan Leaf but this is no longer the case. Many car manufacturers are releasing and offering a range of vehicles with CO2 emissions below 75g/km that are more appealing to the wider market.

The following are all below the CO2 limit: Audi e-tron range (A3, Q7), BMW e-range (including 225xe, 330e, 740e, I3), Mercedes plug-in hybrid (including various 350e PHEV C-class and E-class models and S-class 500e), Porsche Panamera S E-Hybrid, Tesla Model S, VW e-Golf (including GTE), Volvo V60 / XC90 plug-in hybrid. Surprisingly, even more exotic cars such as the Porsche 918 Spyder and BMW i8 are also below the limit and therefore qualify.

Other benefits: The UK Government has recently defined vehicles which have CO2 emissions below 75g/km as Ultra Low Emission Vehicles (ULEV). These vehicles qualify for a 100% discount on the London Congestion Charge.

Government grants are available towards the cost of a new electric/plug-in car (or van), as long as it meets certain conditions. The grant generally covers up to 35% of the cost of a car, up to a maximum of either £2,500 or £4,500 depending on the model. Plug-in car grant applications are generally handled by the car dealer.

Benefit in kind charges have for some time been scaled depending on a vehicle’s emissions, and for 2016/17, cars with CO emissions between 51 to 75g/km the benefit charge is reasonably 11% of the list price of the vehicle (petrol) and 14% (diesel) for cars.

With manufacturers specifically offering lower emission cars that are now more appealing, perhaps now is the time to consider a change in company motoring while at the same time obtaining full capital allowances?

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