Changes to capital allowance CO2 emission thresholds due to be introduced from April 2018 could see 100g/km become the new company car choice list ‘cap’.
In a series of Budget 2016 measures Chancellor of the Exchequer George Osborne said:
•The 100% First Year Allowance (FYA) for businesses purchasing low emission cars would be extended for a further three years to April 2021. The 100% FYA had been due to end on March 31, 2018.
•The main rate threshold for capital allowances for business cars, currently set at 130 g/km, will be reduced to 110 g/km of CO2 and the FYA threshold to 50 g/km from April 2018, to reflect falling vehicle emissions.
The Chancellor is giving companies a two-year window to react to the changes, which means that, thresholds for capital allowances on cars bought outright will be:
•Vehicles up to 50g/km (reduced from 75g/km): Companies can write down the full cost against their taxable profits
•Vehicles emitting 51-110g/km: Companies can write down 18% of the cost of the car against their taxable profits each year, on a reducing balance basis
•Vehicle above 110g/km: Companies can write down 8% of the cost of the car against their taxable profits each year, on a reducing balance basis
It also follows that leasing companies, which are ineligible to claim 100% first-year writing down allowances on cars, will be restricted to 18% (0-110 g/km) and 8% (from 111 g/km) on a reducing balance basis. Similarly, the CO2 threshold for the 15% lease rental restriction is linked to the threshold for capital allowances for business cars, so that rate will be reduced from 130g/km to 110g/km from April 2018.
The government will further review the case for the FYA and the appropriate business cars emission thresholds from 2021 at Budget 2019.