Introduction Details of the Schedule Plant and machinery allowances for cars and motor cycles
3.Paragraph 2 amends general exclusion 2 in section 38B of CAA, which states that expenditure on cars cannot qualify for annual investment allowance, by substituting the new definition of a car in section 268A of CAA for the old definition in section 81 of CAA. Section 81 of CAA (extended meaning of “car”) is repealed by paragraph 5 below.
4.Paragraph 3 substitutes the new definition of a car in section 268A of CAA for the old definition in section 81 of CAA in the second exclusion in section 46(2) of CAA which provides that expenditure on cars cannot be first-year qualifying expenditure.
5.Paragraph 4 repeals sections 74 to 79 of CAA (cars above the cost threshold). Sections 74 and 75 of CAA require that, if expenditure on a car exceeds £12,000, the expenditure be pooled in a single asset pool. Writing down allowances (WDA) are restricted to a maximum of £3,000 per annum.
Section 76 of CAA deals with contributions. It provides that where a person makes a contribution towards another party’s expenditure on a car costing more than £12,000, the person making the contribution can claim the WDAs. However, the available WDAs are restricted to a total of £3,000.
Sections 77 to 78 of CAA require that when a car is used for a non–qualifying purpose (e.g. private use) that the WDA is further restricted on a just and reasonable basis to reflect business use. On disposal of the vehicle any balancing charges/allowances are restricted in the same way.
Section 79 of CAA is an anti-avoidance measure that may apply in certain circumstances when cars (in single asset pools) are sold to connected parties.
6.Paragraph 6 substitutes the new definition of a car in the table in section 84 of CAA, which lists expenditure that cannot be treated as short-life asset expenditure.
7.Paragraph 7 amends section 104A (special rate expenditure) of CAA. Expenditure on cars which are not main rate cars, i.e. those with tail pipe emissions exceeding 160 grams of CO2 per kilometre driven, qualifies for writing down allowances at the special rate of 10 per cent.
8.Sub-paragraph (2) amends subsection (1) of section 104A of CAA so that expenditure on or after the second relevant date on a car that is not a main rate car is treated as special rate expenditure.
9.Sub-paragraph (3) amends subsection (2) of section 104A of CAA for the introduction of a second relevant date.
10.Paragraph 8 inserts new section 104AA of CAA (meaning of “main rate car”). Generally it is a car with CO2 emissions of 160 grams per kilometre driven or less, although all cars that were first registered before 1 March 2001 are main rate cars.
11.Paragraph 9 inserts new section 104F into CAA. This is to prevent the artificial generation of balancing allowances by groups of companies who engineer the cessation of a group company’s business of providing cars, only for another company in the group to continue a similar activity. It applies if conditions A, B and C are met.
12.New subsection (4) explains that condition C is that the company would otherwise be entitled to a balancing allowance in the special rate pool and that this balancing allowance would be greater than the total of any balancing charges less any balancing allowances in any other pools.
13.New subsection (5) explains that the balancing allowance that the company is entitled to in respect of the special rate pool, is limited to the balancing charges less balancing allowances arising on the other pools. This is so that a company will not be denied a balancing allowance on the special rate pool while at the same time bringing a balancing charge into account in another pool.
14.New subsections (6) and (7) explain that an amount equal to the balancing allowance, that the ceasing company would otherwise have been entitled to, will be treated as expenditure incurred by another company in the same group relief group, provided it carries on a qualifying activity of making cars available to other persons. This is the relevant company.
15.New subsection (9) explains that when the ceasing company’s penultimate chargeable period and the period in which the relevant company is treated as acquiring the expenditure overlap, the expenditure acquired is apportioned so that writing down allowances cannot be claimed by the relevant company for the overlapping period. This is to prevent writing down allowances on the expenditure being claimed by both companies for the same period.
16.Paragraph 10 inserts new section 208A into CAA. This is an anti–avoidance rule to prevent persons selling a car in a section 206 pool at undervalue in order to generate a balancing allowance.
17.New subsection (2) explains that a section 206 car is one that is allocated to a single asset pool because it is used partly for a purpose other than a qualifying activity.
18.Paragraph 11 inserts new sections 268A, 268B and 268C (Cars etc) into CAA. New section 268A defines the terms “car” and “motor cycle”. New section 268B defines an electrically-propelled vehicle. New section 268C defines various terms relating to emissions.