Businesses are being advised of the pitfalls – and potential opportunities – arising from sweeping changes to the tax relief available for expenditure by businesses on cars.
Under changes confirmed late last year, the way tax relief is calculated for motor cars that are purchased or leased will be radically changed from April.
The most important change will see the scrapping of the one-off adjustment for tax relief when a car is sold, and instead the relief will be spread over several years, even after the car has been disposed of. The other significant change will see tax allowances calculated on the basis of the car’s carbon dioxide emissions rather than its cost.
The rules differ depending on whether the vehicle is for a company, partnership or sole trader and also if it is used privately by the business owner, and whether it is purchased or leased.
Winter Rule tax partner Peter Penneycard said: “The Government hasn’t gone out of its way to make this easy for business and we wrote to all our business clients before Christmas saying they need to be thinking about the implications.
“Despite the current climate businesses still need to invest in new vehicles and these changes are hugely relevant to both the timing and method of purchase. In certain cases they might be better off leasing than buying because the tax relief is given over a much shorter time, but one might want to delay a new lease until after April when certain restrictions are more relaxed.
“In other cases you might be better off going for an outright purchase, but might want to do it before the end of the tax year so that you can still benefit from elements of the old tax regime. There’s no one-size-fits-all solution which is why we’re advising our clients to talk to us about the implications before it’s too late.”
The changes will impact on companies from April 1 and sole traders and partnerships from April 6.
Winter Rule is currently building new offices on Tregolls Road in Truro following the demolition of its old offices on the same site last year. The frame for the three-storey, environmentally friendly development is complete and the new offices are due to open in the autumn.