Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
108

      (4)
In sub-paragraph (2)—
(a)
after “33” insert “or this sub-paragraph”, and
(b)
for “an expense” substitute “giving rise to an expense of the relevant
amount”.
      (5)
After that sub-paragraph insert—
5
   “
(2A)  The relevant amount is the amount of the loss treated as an
expense increased by

D
365 x R


where—
D is the number of days in the accounting period in which the
loss is made, and
10
R is the percentage rate applicable to section 826 of ICTA
under section 178 of FA 1989.”
      (6)
In sub-paragraph (3), after “The” insert “amount of the”.
      (7)
In sub-paragraph (4)—
(a)
after “33” insert “or this paragraph”, and
15
(b)
for “the expense under that paragraph” substitute “that expense”.
Commencement
9     (1)
The amendments made by paragraph 8 have effect in relation to losses
incurred in accounting periods ending on or after 22 April 2009.
      (2)
The other amendments made by this Schedule have effect where the
20
relevant day is on or after that date.
Schedule 11
Section 30

Tax relief for business expenditure on cars and motor cycles
Part 1
Capital allowances
25
Plant and machinery allowances for cars and motor cycles
1
Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
2
In section 38B (general exclusions from AIA qualifying expenditure), in
general exclusion 2, for “81” substitute “268A”.
3
In section 46(2) (general exclusions from first year allowances), in general
30
exclusion 2, for “81” substitute “268A”.
4
Omit sections 74 to 79 (cars above the cost threshold).
5
Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire
cars).

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
109

6
In section 84 (cases in which short-life asset treatment is ruled out), in the
Table, in item 3, in the first column, for “81” substitute “268A”.
7     (1)
Section 104A (special rate expenditure) is amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a), after “the” insert “first”,
5
(b)
omit “and” at the end of paragraph (c), and
(c)
insert at the end “, and
(e)
expenditure incurred on or after the second relevant
date on the provision of a car that is not a main rate
car.”
10
      (3)
In subsection (2), after “The” insert “first”.
      (4)
After that subsection insert—
“(3)
The second relevant date is—
(a)
for corporation tax purposes, 1 April 2009, and
(b)
for income tax purposes, 6 April 2009.
15
(4)
In this section—
“car” has the meaning given in section 268A;
“main rate car” has the meaning given in section 104AA.”
8
After that section insert—
“104AA
Meaning of “main rate car”
20
(1)
“Main rate car” means—
(a)
a car that is first registered before 1 March 2001,
(b)
a car that has low CO2 emissions, or
(c)
a car that is electrically-propelled.
(2)
For the purposes of this section a car has low CO2 emissions if it
25
meets conditions A and B.
(3)
Condition A is that, when the car is first registered, it is so registered
on the basis of a qualifying emissions certificate.
(4)
Condition B is that the applicable CO2 emissions figure in relation to
the car does not exceed 160 grams per kilometre driven.
30
(5)
The Treasury may by order amend the amount from time to time
specified in subsection (4).
(6)
An order under subsection (5) may contain transitional provision
and savings.
(7)
In this section—
35
“applicable CO2 emissions figure” and “qualifying emissions
certificate” have the meanings given in section 268C;
“car” has the meaning given in section 268A;
“electrically-propelled” has the meaning given in section 268B.”

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
110

9
After section 104E insert—
“104F
Special rate cars: discontinued activity continued by relevant
company
(1)
This section applies if—
(a)
a company (“the taxpayer”) has incurred special rate
5
expenditure within section 104A(1)(e) (expenditure on a car
other than a main rate car) to which section 104C applies
(allocation to special rate pool),
(b)
the qualifying activity carried on by the taxpayer is
permanently discontinued, and
10
(c)
conditions A, B and C are met.
(2)
Condition A is that the qualifying activity carried on by the taxpayer
consisted of or included (other than incidentally) making cars
available to other persons.
(3)
Condition B is that, at any time in the 6 months after the taxpayer’s
15
qualifying activity is permanently discontinued, the qualifying
activity of a group relief company consists of or includes (other than
incidentally) making cars available to other persons.
(4)
Condition C is that the balancing allowance (“SBA”) to which the
taxpayer would be entitled (but for this section) in respect of the
20
special rate pool is greater than—

where—
BC is the total of the balancing charges (if any) to which the
taxpayer is liable for the final chargeable period in respect of
any pool, and
25
OBA is the total of the balancing allowances to which the
taxpayer is entitled for that period in respect of any pool
other than the special rate pool.

For the purposes of this section, if BC — OBA is a negative amount,
it is to be treated as if it were nil.
30
(5)
The balancing allowance to which the taxpayer is entitled in respect
of the special rate pool is reduced to an amount equal to BC — OBA.
(6)
The relevant company is to be treated as having incurred qualifying
expenditure within section 104A(1)(e) (“notional expenditure”),
whether or not the relevant company owns cars previously owned
35
by the taxpayer.
(7)
The amount of the notional expenditure is an amount equal to the
amount by which SBA exceeds BC — OBA.
(8)
The relevant company is to be treated as having incurred the
notional expenditure on the day after the end of the taxpayer’s final
40
chargeable period.
(9)
If part of the chargeable period in which the relevant company is
treated as incurring expenditure under this section (“the acquisition
period”) overlaps with the taxpayer’s penultimate chargeable
period—
45

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
111

(a)
the part of the expenditure which is proportional to that part
of the acquisition period is not to be taken into account in
determining the relevant company’s available qualifying
expenditure for the acquisition period, but
(b)
this does not prevent that part of the expenditure being taken
5
into account in determining the relevant company’s available
qualifying expenditure for any subsequent chargeable
period.
(10)
In this section—
“car” has the meaning given in section 268A;
10
“company” means any body corporate;
“group relief company” means—
(a)
a company to which group relief under Chapter 4 of
Part 10 of ICTA would be available (on the making of
a claim) in respect of balancing allowances
15
surrendered by the taxpayer in the taxpayer’s final
chargeable period, and
(b)
a company to which such relief would be available
(on the making of a claim) in respect of balancing
allowances surrendered by a company within
20
paragraph (a);
“main rate car” has the meaning given in section 104AA;
“penultimate chargeable period” means the chargeable period
preceding the final chargeable period;
“the relevant company” means the group relief company
25
mentioned in subsection (3) or, if there is more than one, the
one—
(a)
nominated by the taxpayer not more than 6 months
after the end of the taxpayer’s final chargeable period,
or
30
(b)
in the absence of such a nomination, nominated by
Her Majesty’s Revenue and Customs.”
10
After section 208 insert—
“208A
Cars: disposal value in avoidance cases
(1)
This section applies if—
35
(a)
a disposal value is required to be brought into account under
section 61,
(b)
the disposal event is that the person ceases to own a section
206 car because of a sale or the performance of a contract, and
(c)
allowances under this Part in respect of the person’s
40
expenditure under that transaction are restricted under
section 217 or 218 (anti-avoidance).
(2)
A car is a section 206 car if expenditure on the provision of the car is
required to be allocated to a single asset pool under that section.
(3)
The disposal value to be brought into account is—
45
(a)
the market value of the car at the time of the disposal event,
or

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
112

(b)
if less, the capital expenditure incurred, or treated as
incurred, on the provision of the car by the person disposing
of it.
(4)
The person acquiring the car is to be treated as having incurred
capital expenditure on its provision of an amount equal to the
5
disposal value required to be brought into account under subsection
(3).
(5)
In this section “car” has the meaning given in section 268A.”
11
After section 268 insert—
“Cars etc
10
268A
Meaning of “car” and “motor cycle”
(1)
In this Part “car” means a mechanically propelled road vehicle other
than—
(a)
a motor cycle,
(b)
a vehicle of a construction primarily suited for the
15
conveyance of goods or burden of any description, or
(c)
a vehicle of a type not commonly used as a private vehicle
and unsuitable for such use.
(2)
In this Part “motor cycle” has the meaning given by section 185(1) of
the Road Traffic Act 1988.
20
268B
Electrically-propelled vehicles
For the purposes of this Part a vehicle is electrically-propelled only
if—
(a)
it is propelled solely by electrical power, and
(b)
that power is derived from—
25
(i)
a source external to the vehicle, or
(ii)
an electrical storage battery which is not connected to
any source of power when the vehicle is in motion.
268C
Terms relating to emissions
(1)
In this Part “qualifying emissions certificate”, in relation to a vehicle,
30
means an EC certificate of conformity, or a UK approval certificate,
that specifies—
(a)
in the case of a vehicle other than a bi-fuel vehicle, a CO2
emissions figure in terms of grams per kilometre driven, or
(b)
in the case of a bi-fuel vehicle, separate CO2 emissions figures
35
in terms of grams per kilometre driven for different fuels.
(2)
For the purposes of this Part, in relation to a vehicle other than a bi-
fuel vehicle, the applicable CO2 emissions figure is—
(a)
where the qualifying emissions certificate specifies only one
CO2 emissions figure, that figure, and
40
(b)
where the certificate specifies more than one CO2 emissions
figure, the figure specified as the CO2 emissions (combined)
figure.

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
113

(3)
For the purposes of this Part, in relation to a bi-fuel vehicle, the
applicable CO2 emissions figure is—
(a)
where the qualifying emissions certificate specifies more than
one CO2 emissions figure in relation to each fuel, the lowest
CO2 emissions (combined) figure specified, and
5
(b)
in any other case, the lowest CO2 figure specified by the
certificate.
(4)
In this section—
“bi-fuel”, in relation to a vehicle, means capable of being
propelled by—
10
(a)
petrol and road fuel gas, or
(b)
diesel and road fuel gas;
“diesel” means any diesel fuel within the definition in Article 2
of Directive 98/70/EC of the European Parliament and of the
Council;
15
“EC certificate of conformity” means a certificate of conformity
issued by a manufacturer under any provision of the law of a
member State implementing Article 6 of Council Directive
70/156/EEC, as amended;
“petrol” has the meaning given by Article 2 of Directive 98/70/
20
EC of the European Parliament and of the Council;
“road fuel gas” has the same meaning as in section 171(1) of
ITEPA 2003;
“UK approval certificate” means a certificate issued under—
(a)
section 58(1) or (4) of the Road Traffic Act 1988, or
25
(b)
Article 31A(4) or (5) of the Road Traffic (Northern
Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).”
Consequential amendments of CAA 2001
12
CAA 2001 is amended as follows.
13
In section 33 (personal security), omit subsection (7).
30
14    (1)
Section 45D (expenditure on cars with low carbon dioxide emissions) is
amended as follows.
      (2)
In subsection (1), for paragraph (c) substitute—
“(c)
the car—
(i)
is electrically-propelled, or
35
(ii)
has low CO2 emissions, and”.
      (3)
In subsection (2), for “a car with low CO2 emissions is a car which” substitute
“a car has low CO2 emissions if it”.
      (4)
In subsection (3), for the words from “an EC certificate” to the end substitute
“a qualifying emissions certificate.”
40
      (5)
In subsection (4), for “in the case of” substitute “in relation to”.
      (6)
Omit subsections (5) and (6).
      (7)
In subsection (8)—

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
114

(a)
after “car” insert “is to a car within the meaning of section 268A,
except that it”, and
(b)
omit paragraph (b) (and the “but” before it).
      (8)
Omit subsections (9) and (10).
      (9)
After subsection (10) insert—
5
“(11)
In this section—
“applicable CO2 emissions figure” and “qualifying emissions
certificate” have the meanings given in section 268C;
“electrically-propelled” has the meaning given in section 268B.”
15
In section 54(3) (single asset pools), omit “section 74 (car above the cost
10
threshold)”.
16
In section 55(6) (determination of entitlement or liability), after “subject to”
insert “section 104F (special rate cars: discontinued activity continued by
relevant company) and”.
17
In section 65(3) (the final chargeable period), for “sections 77(1) and”
15
substitute “section”.
18
In section 66 (list of provisions about disposal values)—
(a)
omit the entry in the list relating to section 79, and
(b)
insert at the appropriate place—

“section 208A
cars: disposal value in

20

avoidance cases”.

19    (1)
In section 84 (cases in which short-life asset treatment is ruled out), the Table
is amended as follows.
      (2)
In item 3, for the words in the second column substitute “The car is a hire car
for a disabled person (as defined by section 268D).”
25
      (3)
In item 4, in the second column, insert “The expenditure is incurred on the
provision of a car which is a hire car for a disabled person (as defined by
section 268D)”.
      (4)
In item 5, in the second column, for “within section 82(4) (cars hired out to
persons receiving disability allowances etc)” substitute “a hire car for a
30
disabled person (as defined by section 268D)”.
20    (1)
Section 86 (short-life assets) is amended as follows.
      (2)
In subsection (2)(b), for “main pool” substitute “appropriate pool”.
      (3)
After subsection (4) insert—
“(5)
In subsection (2)(b) “appropriate pool” means—
35
(a)
in the case of expenditure incurred on the provision of a car
that is not a main rate car (as defined by section 104AA), the
special rate pool, and
(b)
in any other case, the main pool.”
21
In section 96 (expenditure on cars excluded from being long-life asset
40
expenditure), for “car (as defined by section 81)” substitute “car or motor
cycle (as defined by section 268A)”.