On 5th February the government passed the legislation announced in Budget 2020 to extend and tighten the availability of 100% First Year Allowances for low emission cars.
The measure is designed to incentivise the uptake of zero CO2 emission vehicles by businesses and support the Government’s announcement of its desire to phase out the sale of new petrol, diesel and hybrid cars from 2030. This is also intended to support its wider policy on climate change to reduce all greenhouse gas emissions from the UK to net zero by 2050.
The Regulations amend sections 45D, 45DA, 45E and 104AA of the Capital Allowances Act (CAA) 2001. They extend the availability of 100% first-year allowances (FYAs) for expenditure on low-emission cars, zero-emission goods vehicles and gas refuelling equipment for a further four years. The CO2 emissions thresholds for cars qualifying for FYAs and main rate writing down allowances (WDAs), and that for calculating lease rental restrictions are, however, being reduced.
Summary
These Regulations make the following amendments:
extend the first-year allowance for cars with low carbon dioxide emissions for expenditure incurred up to 31st March 2025. They also reduce the qualifying emissions threshold for the first-year allowance from 50 grams to 0 grams per kilometre driven, in relation to expenditure incurred on or after 1st April 2021.
extend the relief for zero-emission goods vehicles for expenditure incurred up to 31st March 2025 for corporation tax purposes and up to 5th April 2025 for income tax purposes.
extend the relief for plant and machinery for gas refuelling stations for expenditure incurred up to 31st March 2025.
reduce the qualifying CO2 emissions threshold for the main rate car WDA from 110 grams to 50 grams per kilometre driven, in relation to expenditure incurred on or after 1st April 2021 for corporation tax purposes and 6th April 2021 for income tax purposes. The reduced threshold will also apply for determining the lease rental restriction for costs of hiring business cars for more than 45 consecutive days, in relation to contracts entered into, on or after 1 or 6 April 2021.
These Regulations will come into force on 1 April 2021. If you have any question on this, or any other capital allowances related topic, please do not hesitate to contact us.
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