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
114

268C
Terms relating to emissions
(1)
In this Part “qualifying emissions certificate”, in relation to a vehicle,
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
5
emissions figure in terms of grams per kilometre driven, or
(b)
in the case of a bi-fuel vehicle, separate CO2 emissions figures
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—
10
(a)
where the qualifying emissions certificate specifies only one
CO2 emissions figure, that figure, and
(b)
where the certificate specifies more than one CO2 emissions
figure, the figure specified as the CO2 emissions (combined)
figure.
15
(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
20
(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—
25
(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;
30
“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/
35
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
40
(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).
45

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
115

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
5
(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.”
10
      (5)
In subsection (4), for “in the case of” substitute “in relation to”.
      (6)
Omit subsections (5) and (6).
      (7)
In subsection (8)—
(a)
after “car” insert “is to a car within the meaning of section 268A,
except that it”, and
15
(b)
omit paragraph (b) (and the “but” before it).
      (8)
Omit subsections (9) and (10).
      (9)
After subsection (10) insert—
“(11)
In this section—
“applicable CO2 emissions figure” and “qualifying emissions
20
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
threshold)”.
16
In section 55(6) (determination of entitlement or liability), after “subject to”
25
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”
substitute “section”.
18
In section 66 (list of provisions about disposal values)—
30
(a)
omit the entry in the list relating to section 79, and
(b)
insert at the appropriate place—

“section 208A
cars: disposal value in

avoidance cases”.

19    (1)
In section 84 (cases in which short-life asset treatment is ruled out), the Table
35
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).”
      (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
40
section 268D)”.

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
116

      (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
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”.
5
      (3)
After subsection (4) insert—
“(5)
In subsection (2)(b) “appropriate pool” means—
(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
10
(b)
in any other case, the main pool.”
21
In section 96 (expenditure on cars excluded from being long-life asset
expenditure), for “car (as defined by section 81)” substitute “car or motor
cycle (as defined by section 268A)”.
22
After section 268C (inserted by this Part of this Schedule) insert—
15
“268D
Hire cars for disabled persons
(1)
For the purposes of this Part a car is a hire car for a disabled person
if it is provided wholly or mainly for hire to, or the carriage of,
disabled persons in the ordinary course of a trade.
(2)
“Disabled person” means a person in receipt of—
20
(a)
a disability living allowance under—
(i)
the Social Security Contributions and Benefits Act
1992, or
(ii)
the Social Security Contributions and Benefits
(Northern Ireland) Act 1992,
25

because of entitlement to the mobility component,
(b)
a mobility supplement under a scheme made under the
Personal Injuries (Emergency Provisions) Act 1939,
(c)
a mobility supplement under an Order in Council made
under section 12 of the Social Security (Miscellaneous
30
Provisions) Act 1977, or
(d)
a payment that appears to the Treasury to be similar to those
mentioned in paragraphs (a) to (c) and that is specified by
order made by the Treasury.”
23    (1)
Part 2 of Schedule 1 (defined expressions) is amended as follows.
35
      (2)
In the entry relating to “car (in Part 2)”, for “section 81” substitute “section
268A”.
      (3)
Insert at the appropriate places—

“applicable CO2 emissions figure (in

section 268C”

Part 2)

40

“electrically-propelled (in Part 2)

section 268B”

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
117

“hire car for a disabled person (in

section 268D”

Part 2)

“motor cycle (in Part 2)

section 268A”

“qualifying emissions certificate (in

section 268C”.

Part 2)

5

24
In Schedule 3 (transitionals and savings), omit paragraph 19 (cars above the
cost threshold) and the headings immediately before it.
Consequential repeal
25
In consequence of the amendments made by this Part of this Schedule, in FA
2002, in Schedule 19, omit paragraph 6.
10
Commencement and transitionals: introduction
26
For the purposes of this Part of this Schedule—
(a)
the first relevant date is—
(i)
for corporation tax purposes, 1 April 2009, and
(ii)
for income tax purposes, 6 April 2009,
15
(b)
the second relevant date is—
(i)
for corporation tax purposes, 1 August 2009, and
(ii)
for income tax purposes, 6 August 2009, and
(c)
the third relevant date is—
(i)
for corporation tax purposes, 1 April 2014, and
20
(ii)
for income tax purposes, 6 April 2014.
27    (1)
For the purposes of this Part of this Schedule “new expenditure” means—
(a)
expenditure incurred on or after the first relevant date, and
(b)
expenditure incurred before that date to which sub-paragraph (2)
applies,
25

and expenditure that is not new expenditure is “old expenditure”.
      (2)
This sub-paragraph applies to expenditure if—
(a)
it is incurred under an agreement for the provision of a car entered
into after 8 December 2008, and
(b)
under that agreement the car is not required to be made available
30
before the second relevant date.
      (3)
For the purposes of sub-paragraph (2), an agreement is entered into on the
date on which the following conditions are met—
(a)
there is a contract in writing for the provision of the car,
(b)
the contract is unconditional or, if it is conditional, the conditions
35
have been met, and
(c)
no terms remain to be agreed.
Commencement
28    (1)
The amendments made by this Part of this Schedule have effect in relation
to new expenditure (subject to sub-paragraph (2)).
40

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
118

      (2)
The repeal of section 79 of CAA 2001 and the amendments made by
paragraphs 10 and 18 have effect in cases in which a person ceases to own a
car or motor cycle if the expenditure incurred on the provision of the car or
motor cycle is new expenditure.
29    (1)
The repeal of sections 74 to 78 of CAA 2001 and the amendments made by
5
paragraphs 15 and 17 have effect in relation to old expenditure, but only for
chargeable periods beginning on or after the third relevant date.
      (2)
The repeal of section 79 of CAA 2001 and the amendment made by
paragraph 18(a) have effect in cases in which a person ceases to own a car or
motor cycle if the expenditure incurred on the provision of the car or motor
10
cycle is old expenditure, but only for chargeable periods beginning on or
after the third relevant date.
Transitionals
30    (1)
This paragraph applies where expenditure incurred by a person on the
provision of a car or motor cycle includes both new expenditure and old
15
expenditure.
      (2)
The new expenditure and the old expenditure are to be treated as if they
were incurred on the provision of separate (but identical) cars or motor
cycles.
      (3)
Any amount required to be brought into account in connection with a
20
disposal event in respect of the car or motor cycle mentioned in sub-
paragraph (1) is to be apportioned on a just and reasonable basis.
31    (1)
This paragraph applies where—
(a)
old expenditure is required to be allocated to a single asset pool by
section 74 of CAA 2001,
25
(b)
there is unrelieved expenditure in that pool at the end of a
transitional chargeable period, and
(c)
the unrelieved expenditure is not required to be allocated to a single
asset pool by any other provision of Part 2 of that Act.
      (2)
The unrelieved expenditure must be carried forward to the main pool.
30
      (3)
A “transitional chargeable period” is one that begins before the third
relevant date and ends on or after the day before the third relevant date.
32
An order made under section 82(4)(d) of CAA 2001 (qualifying hire cars for
disabled persons) before the day on which this Act is passed (and not
revoked before that day) has effect as if it had also been made under section
35
268D(2)(d) of that Act (hire cars for disabled persons) (inserted by this Part
of this Schedule).
Interpretation
33
In this Part of this Schedule—
(a)
“car” and “motor cycle” have the meaning given in section 268A of
40
CAA 2001 (inserted by paragraph 11), and
(b)
other expressions used in this Part of this Schedule and in Part 2 of
CAA 2001 have the same meaning here as in that Part of that Act.

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 2 — Restrictions on deductions for hire expenses
119

Part 2
Restrictions on deductions for hire expenses
Income tax
34
ITTOIA 2005 is amended as follows.
35
In section 31(1)(b) (relationship between rules prohibiting and allowing
5
deductions), omit “or motor cycle”.
36    (1)
Section 48 (rules restricting deductions from profits: car or motor cycle hire)
is amended as follows.
      (2)
In subsection (1), for “or motor cycle” (in the first place) to the end substitute
“which is not—
10
(a)
a car that is first registered before 1 March 2001,
(b)
a car that has low CO2 emissions,
(c)
a car that is electrically propelled, or
(d)
a qualifying hire car.”
      (3)
In subsection (2), for the words from “multiplying” to the end substitute
15
“15%”.
      (4)
In subsection (4), for “multiplying it by the fraction in subsection (2)”
substitute “15%”.
      (5)
In subsection (4A)(a), (b) and (c), omit “or motor cycle”.
      (6)
Omit subsection (5).
20
      (7)
In the heading, omit “or motor cycle”.
37    (1)
Section 49 (car or motor cycle hire: supplementary) is amended as follows.
      (2)
In subsection (1)—
(a)
omit “or motor cycle”,
(b)
omit “one”,
25
(c)
before paragraph (a) insert—
“(za)
a motor cycle (within the meaning of section 185(1) of
the Road Traffic Act 1988),”, and
(d)
in paragraphs (a) and (b), at the beginning insert “a vehicle”.
      (3)
After that subsection insert—
30
“(1A)
In section 48—
“a car that has low CO2 emissions” has the same meaning as in
section 104AA of CAA 2001 (special rate expenditure: main
rate car);
“electrically propelled” has the meaning given in section 268B of
35
that Act.”
      (4)
In subsection (2)—
(a)
omit “or motor cycle” (in each place),
(b)
omit paragraph (c), and

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 2 — Restrictions on deductions for hire expenses
120

(c)
insert at the end—
“(d)
is leased under a long-funding lease (within the
meaning of section 70G of CAA 2001).”
      (5)
In subsection (6), omit “and section 48”.
      (6)
In the heading, omit “or motor cycle”.
5
38
Omit section 50 (hiring cars with low carbon dioxide emissions).
39
After that section insert—
“50A
Short-term hiring in and long-term hiring out
(1)
Section 48 does not apply to expenses incurred by a person (“the
taxpayer”) on the hiring of a car if condition A or B is met.
10
(2)
Condition A is that—
(a)
the expenses are incurred in respect of the making available
of the car to the taxpayer for a period (“the hire period”) of
not more than 45 consecutive days, and
(b)
if the car is made available to the taxpayer (whether by the
15
same person or different persons) for one or more periods
linked to the hire period, the hire period and the linked
period or periods, taken together, consist of not more than 45
days.
(3)
Condition B is that the expenses are incurred in respect of a period
20
(“the sub-hire period”) throughout which the taxpayer makes the car
available to another person (“the customer”) and—
(a)
the sub-hire period consists of more than 45 consecutive
days, or
(b)
if the taxpayer makes the car available to the customer
25
throughout one or more periods linked to the sub-hire
period, the sub-hire period and the linked period or periods,
taken together, consist of more than 45 days,

but see subsection (4).
(4)
Condition B is not met if—
30
(a)
the customer is an employee of the taxpayer or of a person
connected with the taxpayer, or
(b)
during all or part of the sub-hire period (or any period linked
to the sub-hire period), the customer makes any car available
to an employee of the taxpayer under arrangements with the
35
taxpayer or with a person connected with the taxpayer.
(5)
Neither condition A nor condition B is met if the car is hired under
arrangements the purpose, or one of the main purposes, of which
is—
(a)
to disapply or reduce the effect of section 48, or
40
(b)
other avoidance of tax.
(6)
For the purposes of condition B, the expenses incurred by the
taxpayer on the hiring of the car must be apportioned between—
(a)
the sub-hire period, and
(b)
the remainder of the period during which the car is made
45
available to the taxpayer,