HMRC have confirmed that the first year capital allowance (FYA) rules for business expenditure on business cars, zero emission goods vehicles and equipment for gas refuelling stations are being extended from April 2021 until April 2025.
The CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars are also being reduced.
The extension supports businesses to move away from CO2 emitting cars and feeds into the Government’s strategy to end sales of new petrol, diesel and hybrid cars/vans by 2035 or earlier.
For the FYA for zero emission goods vehicles, the legislation will have effect from 1 April 2021 for businesses chargeable to corporation tax. For businesses chargeable to income tax, it will have effect from 6 April 2021.
For the reduction to business cars CO2 emission thresholds together with the FYAs for low CO2 emission cars and equipment for gas refuelling stations, the legislation will have effect from 1 April 2021.
Business cars:
- The 100% FYA will only be available for the purchase of new electric cars or cars which have zero CO2 emissions.
- Writing Down Allowance (WDA) at the main rate (18%) will only be available for cars with CO2 emissions not exceeding 50g/km.
- WDAs at the special rate (6%) will be available for cars with CO2 emissions exceeding 50g/km.
There is no change for businesses with expenditure on zero emission goods vehicles and equipment for gas refuelling stations.
If you would like to discuss any of the above, please contact us.
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