Commentary on Sections Overview Chapter 4: Rules restricting deductions Section 1251: Car or motor cycle hire
3163.This section restricts the amount that a company can deduct in respect of the cost of hiring certain cars or motor cycles with a retail price (when new) of more than £12,000. The section is based on sections 578A and 578B of ICTA. The corresponding rule for trading income is in section 56.
3164.Under section 75B(3) of ICTA any recovery of the hire charge is restricted to the reversal of “so much of the debit as represents the expenses of management.” Subsection (4) makes this restriction explicit and mirrors the trading income rule in section 56(4). See Change 83 in Annex 1.
3165.Subsection (7) of the section invokes the supporting sections 57 and 58. So the definition of “qualifying hire car or motor cycle” includes a car or motor cycle where ownership passes without the exercise of an option to purchase. See the commentary on section 57 and Change 10 in Annex 1.