Company Cars: Capital Allowances

Treasury written question – answered on 3rd July 2012.

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Photo of Sharon Hodgson Sharon Hodgson Shadow Minister (Education)

To ask the Chancellor of the Exchequer

(1) what impact assessment of the UK's low and zero-emission vehicle manufacturing sector he conducted prior to the announcement in Budget 2012 that leased business cars would not be eligible for first year capital allowances;

(2) what representations he has received from (a) the low and zero-emission vehicle manufacturing sector and (b) other businesses since announcing that leased business cars would not be eligible for first year capital allowances;

(3) what consultation he conducted with (a) the low and zero-emission vehicle manufacturing sector and (b) other businesses before announcing that leased business cars would not be eligible for first year capital allowances;

(4) what savings he expects to accrue to the Exchequer from exempting low and zero-emission vehicles leased by businesses from first year capital allowances.

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury

The Chancellor of the Exchequer routinely considers the fiscal and economic implications of tax policy options as part of the annual Budget process. It is not expected that these changes will have a substantial impact on the overall UK economy or on administrative costs for business. A tax information and impact note setting out expected impacts will be published at Budget 2013 prior to the changes being legislated in Finance Bill 2013.

Treasury Ministers and officials meet with, and receive representations from, a wide range of organisations and individuals in the public and private sectors as part of the usual policymaking process. As was the case with previous Administrations, it is not the Government's practice to provide details of all such representations.

The Government do not consult on rate changes before they are announced. Expenditure on cars for leasing will from 1 April 2013 qualify for standard capital allowance rates of 18% per annum instead of a first year allowance of 100%, aligning their treatment with other leased assets.

The changes to capital allowance rates applicable to leased cars affects the timing of when the tax allowance is claimed, rather than the overall amount of allowance, and so the Exchequer impact is expected to be broadly revenue neutral. At the Budget policy costings were published that explain the overall cost of the package of changes and the methodology used. This document can be accessed via this link

http://cdn.hm-treasury.gov.uk/budget2012_policy_costings.pdf

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