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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: apportionment

S50A Income Tax (Trading and Other Income) Act 2005, S58A 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.

Apportionment of expenses

Where a trader leases in cars for onward hire then it may be subject to the rental restriction at BIM47740 in respect of some of those cars if they are not exempt from the restriction and the term of outward rental is less than 45 days. Where the trader sub-hires the same car for some periods less than 45 days and some periods more than 45 days (either to the same or different customers) then the expenses the trader incurs on the hire of the car are to be apportioned on a just and reasonable basis in order to arrive at the proportion of the expenses to which the restriction is to be applied.


A car hire trader has 30 cars which it has leased from a bank for a year.

20 of those cars have CO2 emissions of less than 160g/km, so the restriction is not applied to the rentals for those cars.

Of the remaining 10 cars, 2 are used exclusively for longer term hire where the hire period is always more than 45 days, so the trader will not have to apply the restriction to the rentals it pays in respect of those cars.

5 cars are kept exclusively for short hire and are never hired out for more than 45 days, so the trader will have to identify its rental expenses in respect of those cars and apply the restriction to them.

The 3 remaining cars are used both for short term (less than 45 days) hire and for hire for periods in excess of 45 days. The trader has to consider each of these cars individually and calculate (on a just and reasonable basis) the proportion of the total period each car was sub hired for less than 45 days and apply the restriction to that proportion of the rental expenses for that car.