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HMRC internal manual

Business Income Manual

Specific deductions: travel and subsistence: cars - restriction of hiring costs: hire periods beginning on or after 1/6 April 2009

S48-S50B Income Tax (Trading and Other Income) Act 2005, S56-S58B Corporation Tax Act 2009

This guidance applies to expenditure incurred on hiring cars where the hire period begins on or after 1 April 2009 for Corporation Tax purposes and 6 April 2009 for Income Tax purposes. See BIM47775 for the election to apply the previous rules where the hire period begins on or after 1/6 April 2009 but before 1/6 April 2010.

The deduction for expenditure in computing the profits of a trade which is incurred on hiring certain cars is restricted. In summary the restriction:

  • applies to most cars with CO2 emissions over 110g/km (130g/km for cars bought before 1 April 2018);
  • requires a flat rate disallowances of 15 per cent of the amount of deduction that would otherwise be allowed (see BIM47740);
  • applies to only one lease in a chain of leases (in most cases this will be the last business user) (see BIM47750);
  • applies to most types of cars, but not to motor cycles (see BIM47730).

A similar rule applies to restrict the amount treated as an expense of management of a company with investment business.