Session 2013 - 14
Other Bills before Parliament
Finance BillSchedule 5 — Deductions allowable at a fixed rate
Provisions not applicable to certain firms
The provisions of this Chapter do not apply in calculating the profits
of a trade carried on by a firm for a period if one or more of the
persons who have been partners in the firm at any time during the
period was not an individual at that time.
Expenditure on vehicles
This section applies if, in calculating the profits of a trade of a person
for a period—
a deduction would otherwise be allowable for the period in
respect of qualifying expenditure incurred in relation to a
relevant vehicle (see subsection (2)), or
a deduction would be so allowable in respect of such
expenditure but for the fact it is capital expenditure.
In this section “relevant vehicle” means a car, motor cycle or goods
is used for the purposes of the trade, and
is not an excluded vehicle (see section 94E).
The person may make a deduction under this section for the period
in respect of the qualifying expenditure.
If a deduction for a period is made under this section—
no other deduction is allowed (for that or any other period)
in respect of the qualifying expenditure, and
this section applies in relation to the relevant vehicle for
every subsequent period for which the vehicle is used for the
purposes of the trade.
The amount of the deduction is the appropriate mileage amount in
relation to the relevant vehicle for the period (see section 94F).
In this section “qualifying expenditure”, in relation to a vehicle,
means any expenditure incurred in respect of the acquisition,
ownership, hire, leasing or use of the vehicle, other than incidental
expenses incurred in connection with a particular journey.
For provision preventing capital allowances from being claimed in
respect of qualifying expenditure incurred in relation to a relevant
vehicle, see section 38ZA of CAA 2001.
A car, motor cycle or goods vehicle that is used for the purposes of a
trade is an “excluded vehicle” for the purposes of section 94D if
condition A or B is met in relation to the vehicle.
Condition A is that the person who is or has been carrying on the
trade has at any time claimed any capital allowances under Part 2 of
CAA 2001 in respect of any expenditure incurred on the provision of
Condition B is that—
the vehicle is a goods vehicle or a motor cycle, and
any of the expenditure incurred on acquiring the vehicle has
been deducted in calculating the profits of the trade for a
period on the cash basis (see section 25A).
The appropriate mileage amount
In calculating the profits of a trade for a period, the appropriate
mileage amount in relation to a relevant vehicle for the period is—
M is the number of miles of business journeys made by a person
(other than as a passenger) using that vehicle in the period,
R is the rate applicable to that kind of vehicle.
The rates applicable are as follows—
Kind of vehicle
Rate per mile
Car or goods vehicle
45p for the first 10,000 miles
25p after that
In a case where the total number of miles of relevant business
journeys made in the period is greater than 10,000, the rate of 45p per
mile is available only in relation to 10,000 of those miles.
“Relevant business journey” means any business journey made in
the period by a car or goods vehicle—
that is used for the purposes of the trade, and
in relation to which section 94D applies for the period.
In this section—
“business journey”, in relation to a vehicle used for the purposes
of a trade, means any journey, or any identifiable part or
proportion of a journey, that is made wholly and exclusively
for the purposes of the trade, and
“relevant vehicle” has the same meaning as in section 94D.
The Treasury may by regulations amend subsection (2) so as to alter
the rates or rate bands.
Regulations under this subsection may also make consequential
amendments to subsection (3).
Definitions of types of vehicle
This section applies for the purposes of sections 94D to 94F (and this
“Car” means a mechanically propelled road vehicle which is not—
a goods vehicle,
a motor cycle,
an invalid carriage, or
a vehicle of a type not commonly used as a private vehicle
and unsuitable to be so used.
“Goods vehicle” means a mechanically propelled road vehicle
is of a construction primarily suited for the conveyance of
goods or burden of any description, and
is not a motor cycle.
“Motor cycle” has the meaning given by section 185(1) of the Road
Traffic Act 1988.
For the purposes of this section “invalid carriage” has the meaning
given by section 185(1) of the Road Traffic Act 1988.
Use of home for business purposes
for a period, a deduction (“the standard deduction”) would
otherwise be allowable for the period in respect of the use of the
person’s home for the purposes of the trade.
The person may, instead of making the standard deduction, make a
deduction for the period under this section.
The amount of the deduction allowable for the period is the sum of
the applicable amounts for each month, or part of a month, falling
within the period.
The applicable amount for a month, or part of a month, is given by
the following Table—
Number of hours worked
25 or more
51 or more
101 or more
where the “number of hours worked” in a month (or part of a month)
is the number of hours spent wholly and exclusively on work done
by the person, or any employee of the person, in the person’s home
wholly and exclusively for the purposes of the trade.
If the person has more than one home, this section has effect as if
those homes were a single home.
The Treasury may by regulations amend subsection (4) so as to alter
Premises used both as home and business premises
Premises used both as a home and as business premises
This section applies if—
a person carries on a trade at any premises,
the premises are used mainly for the purposes of carrying on
the trade, but are also used by the person as a home,
the person incurs expenses in relation to the premises,
the expenses are incurred mainly (but not wholly and
exclusively) for the purposes of the trade, and
in calculating the profits of the trade for a period, a deduction
(“the standard deduction”) would otherwise be allowable for
the period in respect of a part or proportion of the expenses
in accordance with section 34(2).
The amount of the deduction allowable for the period is the amount
of the expenses less the non-business use amount.
The non-business use amount is the sum of the applicable amounts
for each month, or part of a month, falling within the period.
Number of relevant
3 or more
For the purposes of subsection (5) “relevant occupant”, in relation to
a month (or part of a month), means an individual who, at any time
during that month (or that part of a month)—
occupies the premises as a home, or
stays at the premises otherwise than in the course of the
The Treasury may by regulations amend subsection (5) so as to alter
the rates or rate bands.”
In section 31 (relationship between rules prohibiting and allowing
deductions), in subsection (2), after paragraph (a) insert—
In Chapter 18 (post-cessation receipts), in section 254 (allowable
deductions), after subsection (2A) (inserted by paragraph 39 of Schedule 4)
the loss or expense is incurred, or the debit arises, in relation
to a vehicle, and
immediately before the person permanently ceases to carry
on the trade, section 94D (deduction allowable at fixed rate
for expenditure on vehicles) applies in relation to the vehicle,
assume for the purposes of subsection (2) that that section applies in
relation to the vehicle.”
Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
In Chapter 3 (qualifying expenditure), after section 38 insert—
Vehicles for which deductions allowed at fixed rate under Part 2 of
Expenditure is not qualifying expenditure if—
it is incurred in respect of a vehicle in a period, and
a deduction is made for the period in respect of the
expenditure under section 94D of ITTOIA 2005 (deduction
allowable at fixed rate for expenditure on vehicles).”
In Chapter 5 (allowances and charges), in section 59 (unrelieved qualifying
expenditure), at the end insert—
Subsection (9) applies if—
a person carrying on a trade, profession or vocation incurs
expenditure in relation to a vehicle,
at the end of the basis period for a tax year, the person has
unrelieved qualifying expenditure incurred in relation to the
vehicle to carry forward from the chargeable period ending
with that basis period (“the relevant chargeable period”),
in calculating the profits of a trade, profession or vocation of
a person for the following tax year, a deduction is made
under section 94D of ITTOIA 2005 in respect of expenditure
incurred in relation to the vehicle, and
the person does not enter the cash basis for that tax year.
None of the unrelieved qualifying expenditure incurred in relation
to the vehicle may be carried forward as unrelieved qualifying
expenditure from the relevant chargeable period.
Where a person has unrelieved qualifying expenditure to carry
forward from a chargeable period that is not expenditure allocated to
a single asset pool, the amount of the unrelieved qualifying
expenditure incurred in relation to the vehicle is to be determined on
such basis as is just and reasonable in all the circumstances.”
The amendments made by this Schedule have effect for the tax year 2013-14
and subsequent tax years.