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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): cars: expenditure incurred on or after 1 or 6 April 2009 - outline of rules

CAA01/104A & 104AA

The rules described at CA23520 are often referred to as the ‘expensive cars rules’. They were introduced in 1961 as a surrogate benefits charge on luxury cars and, as such, were seen as outdated by business given the subsequent introduction of the benefits-in-kind legislation. The pooling of expensive cars in single asset pools also imposed a disproportionate compliance burden on businesses. Following consultation on the options for modernising the rules, FA 2009 introduced new rules that would both encourage businesses to purchase cars with lower carbon dioxide emissions and reduce their administration costs.

The capital allowances treatment of expenditure on a car after April 2009 (full details of the commencement dates of the new rules are at CA23540) depends on the carbon dioxide emissions of the car rather than its cost. Expenditure after these dates will be pooled in one of two plant and machinery pools.

Broadly, expenditure on cars with CO2 emissions of 160 grams per kilometre driven or less (cars with low CO2 emissions) will be allocated to the main rate plant and machinery pool and attract WDA at 20% per annum. These are main rate cars. Expenditure on cars with emissions above this level will be allocated to the special rate pool and attract WDA at 10% per annum.

The rates of WDA of the main pool and the special rate pool are reduced to 18% and 8% respectively from 1 April 2012 (CT) and 6 April 2012 (IT).

WDA are not capped.

If there is an element of non-business use of the car then the expenditure will still need to be allocated to a single asset pool in accordance with CA27005 but the rate at which WDA are given will depend on the car’s CO2 emissions.

The special rules that applied to expenditure incurred on cars before April 2009 did not apply to qualifying hire cars as defined in CA23515. The emissions based rules that apply from April 2009 apply to all cars; there is no category of qualifying hire cars for capital expenditure incurred after this date.

Certain cars with low CO2 emissions, those with emissions of 110g/km or less, will still qualify for 100% FYA as described in CA23153.