HMRC internal manual

Business Income Manual

BIM47775 - Specific deductions: travel and subsistence: cars - restriction of hiring costs: hire periods beginning on or after 1/6 April 2009: election for old rules

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

Sch11 Para67 Finance Act 2009

Usually expenses in respect of a hire period beginning after 1/6 April 2009 are treated under the rules for the restriction at BIM47725 onwards.

However the details of the these rules were first published in a technical note on 8 December 2008. It is possible taxpayers may have incurred expenses on car (or motor cycle) hire under an agreement entered into (see below) on or before 8 December 2008 with the expectation the old rules would apply. In order to protect their legitimate expectations they were able to elect to use the old rules to calculate the restriction to be applied to the payments under the lease but only where the contract provided for the car to be made available to the lessee before 1 April 2010 (for corporation tax purposes) or 6 April 2010 (for income tax purposes).

An agreement is entered into on the first day the following conditions are met:

  • there is a contract in writing for the use of the car (or motor cycle) by the taxpayer;
  • the contract is unconditional, or if it is conditional the conditions have been met; and
  • no terms remain to be agreed.

The election had to be made by notice given to an officer of Revenue and Customs.

  • For Income Tax purposes the notice had to be made on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends.
  • For Corporation Tax purposes the notice had to be given no later than two years after the end of the relevant chargeable period.

There was no prescribed form of words for the election. For example, a letter setting out all the relevant details would suffice.

The relevant chargeable period means the first chargeable period (as defined for Capital Allowances purposes) in which the taxpayer incurred any expenses on the hire of the vehicle.

The election was irrevocable. That means once it had been made it could not be withdrawn or amended.