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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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Plant and Machinery Allowances (PMA): cars: commencement dates of CO2 emissions-based regime

FA2009/Schedule 11 Paras 26 - 29

The new emissions based rules apply to expenditure on a car incurred on or after:

  • 1 April 2009 (for CT purposes)
  • 6 April 2009 (for IT purposes).

 

There is an exception to this general rule, however. Where expenditure is incurred on the provision of a car and it is incurred under an agreement that was entered into after 8 December 2008, the expenditure will be treated under the new capital allowances rules even if it is incurred before 1 or 6 April 2009. Note, however, that this rule only applies if the car does not have to be made available until 1 August 2009 (for CT purposes) or 6 August 2009 (for IT purposes).

This is an anti-forestalling rule. The new regime may be disadvantageous compared to the old in some circumstances. In the absence of such a rule, once the essential detail of the new emissions-based regime was published on 8 December 2008, it would otherwise have been possible to contrive to pay, or partly pay, for a car before April 2009, to ensure that the expenditure fell to be treated under the old rules, although the car was not actually delivered until some time after April 2009. The rule has been designed to protect against advance payments that would not ordinarily have been made and will, therefore, only apply to expenditure incurred on the provision of a car that does not have to be delivered until after 1 or 6 August 2009. Therefore, this rule would not apply to a deposit paid for a car in January 2009, say, to ensure delivery of the car in May 2009.

It is possible for some of the expenditure on a car to be treated under the old rules and some under the new rules. See CA23550.

Example

On 30 December 2008 a company, with an accounting period to 31 December 2008 orders 2 cars. Car 1 costs £50,000; a deposit of £5,000 is paid on 30 December 2008 and the remaining £45,000 is not required to be paid until 31 May 2009 when the car is delivered. Car 2 costs £100,000; a deposit of £75,000 is paid on 30 December 2008, under an agreement entered into on that date, and the remaining £25,000 is not required to be paid until 31 August 2009 when the car is delivered. Both cars have CO2 emissions exceeding 160g/km.

The company has incurred £80,000 expenditure in the chargeable period to 31 December 2008. The £5,000 incurred on car 1 will be allocated to a single asset pool because the ‘old’ rules apply and the total expenditure on the car exceeds £12,000. The £75,000 deposit on car 2 is allocated to the special rate pool under the new rules because although the expenditure is incurred before 1 April 2009, it is incurred under an agreement entered into after 8 December 2008 and the car does not have to be delivered until after 1 August 2009.

The remaining expenditure on both cars (£70,000) will be allocated to the special rate pool in the chargeable period to 31 December 2009 as it was all incurred after the commencement date for the new rules - 1 April 2009.

For these purposes an agreement is entered into if the following conditions are all met:

  • there is a written contract for the provision of the car,
  • the contract is unconditional, or all the conditions of a conditional contract have been met, and
  • all the terms of the contract have been agreed.