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HMRC internal manual

Business Income Manual

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

S48, S49 Income Tax (Trading and Other Income) Act 2005, S56, S57 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.

What types of cars are affected?

The restriction on the deduction of expenses incurred in hiring a car generally applies to cars with CO2 emissions over 160g/km (the threshold for special rate pool expenditure in the capital allowances regime).

Meaning of car

For the purposes of the restriction a car means a mechanically propelled road vehicle other than:

  • a motorcycle;
  • a vehicle primarily suited for the carrying of goods; or
  • a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.

Guidance on what is a vehicle of a type not commonly used as a private vehicle and unsuitable for such use is at CA23510

Cars whose hire expenses are not restricted

The restriction rules do not apply to expenditure on the hiring of a car which is:

  1. a car that is first registered before 1 March 2001,
  2. a car that has low CO2 emissions (i.e. a car with emissions not exceeding 160g/km based on its qualifying emissions certificate - see BIM47745),
  3. a car that is electrically propelled (i.e. a car propelled solely by electrical power derived from a source external to the vehicle or from a battery which is not connected to any source of power when the vehicle is moving), or
  4. a qualifying hire car.

A ‘qualifying hire car’ is a car which is hired:

* under a hire purchase agreement under which there is no option to purchase;
* under a hire purchase agreement under which there is an option to purchase on the payment of a sum of not more than one per cent of the retail price of the car when new; or
  • under a long-funding lease (see CA23800 onwards).

The restriction rules generally do not apply to expenditure on the hire of a car, which is either:

  1. hired in on short term - see BIM47750,
  2. hired out on long term - see BIM47750,

provided certain conditions are met - see BIM47765.