Fleet News

Company car tax changes will not be retrospective

Changes to the company car tax regime, which come into force next April, will not be retrospectively applied.

Changes to the capital allowance writing down system were announced in the 2008 Budget but, since the announcement, there has been widespread confusion over whether the new tax rules will be applied to cars that are already on fleets.

As a result, the leasing and rental industry association – the BVRLA – and the car fleet operators’ association – ACFO – met with the treasury to clarify the situation.

“There is a sizeable minority within the industry – lessors, fleet operators, funders and accountants – who are not clear about whether the changes to capital allowances being introduced in April 2009 will be retrospectively applied to business cars acquired before this date,” said a joint statement from the two associations.

“Following a meeting with treasury officials we have received additional confirmation that the new rules will apply to ‘all qualifying expenditure incurred on or after 1 April 2009’.”

The BVRLA stated that according to its tax advisors, in tax terms, ‘expenditure’ can only refer to an asset being acquired and not the ongoing depreciation of a previously acquired asset.

This means that cars already owned or on lease will not be retrospectively included in the new tax regime being introduced next year.

“We understand that there is also the possibility that, after an initial period, perhaps three or four years, vehicles within the current ‘expensive car’ bracket will need to transfer into the new system,” said the joint statement.

“The government will also want to set rules that prevent taxpayers exploiting the existing rules by accelerating the date expenditure is ‘incurred’ but delaying the date when a vehicle is brought into use for higher polluting cars.

"The BVRLA and acfo will keep members informed of any transitional rules as soon as they are made public.

"In the meantime, we urge everybody involved in the fleet management industry to start reviewing car policies now so that they are ready for the new tax regime when it arrives.”

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