BIM47730 - Specific deductions: travel and subsistence: cars - restriction of hiring costs: hire periods beginning on or after 1/6 April 2009: scope
S48, S49 Income Tax (Trading and Other Income) Act 2005, S56, S57 Corporation Tax Act 2009
This guidance applies to expenditure incurred on hiring cars where the hire period begins on or after 1 April 2009 for Corporation Tax purposes and 6 April 2009 for Income Tax purposes. See BIM47775 for the election to apply the previous rules where the hire period begins on or after 1/6 April 2009 but before 1/6 April 2010.
What types of cars are affected?
The restriction on the deduction of expenses incurred in hiring a car generally applies to cars with CO emissions over the threshold for special rate pool expenditure in the capital allowances regime of 50 grams per kilometre driven (g/km) (110g/km for cars bought before 1 April 2021).
Meaning of car
For the purposes of the restriction a car means a mechanically propelled road vehicle other than:
- a motorcycle;
- a vehicle of a construction primarily suited for the conveyance of goods or burden of any description; or
- a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.
Guidance on the meaning of 'car' is at CA23510
Double cab pick-ups
For expenditure incurred on the hire of a double cab pick-up before 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, a double cab pick-up with a payload of one tonne or more will continue to not be treated as a car (payload is the difference between a vehicle’s maximum gross weight and its kerbside weight).
For expenditure incurred on the hire of a double cab pick-up on or after 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, HMRC will no longer interpret the definition of a car as excluding double cab pick-ups with a payload of one tonne or more. Guidance on the interpretation of a vehicle which is one of a construction primarily suited for the conveyance of goods or burden of any description can be found at CA23510. It follows that most, if not all, double cab pick-ups will be treated as a car.
Transitional arrangements will apply to expenditure incurred on the hire of a double cab pick-up with a payload of one tonne or more if the contract for hire is entered into before 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax and the expenditure is incurred on or after these dates but before 1 October 2025. In these circumstances, the expenditure will continue to be treated as expenditure not incurred on the hire of a car. Expenditure incurred on or after 1 October 2025 will be treated as expenditure on the hire of a car, regardless of when the contract for hire was entered into.
Cars whose hire expenses are not restricted
The restriction rules do not apply to expenditure on the hiring of a car which is:
- a car that is first registered before 1 March 2001,
- a car that has low CO emissions i.e. a car with emissions not exceeding 50 grams per kilometre driven (g/km) (110g/km for cars bought before 1 April 2021), based on its qualifying emissions certificate - see BIM47745),
- a car that is electrically propelled (i.e. a car propelled solely by electrical power derived from a source external to the vehicle or from a battery which is not connected to any source of power when the vehicle is moving), or
- a qualifying hire car.
A ‘qualifying hire car’ is a car which is hired:
- under a hire purchase agreement under which there is no option to purchase;
- under a hire purchase agreement under which there is an option to purchase on the payment of a sum of not more than one per cent of the retail price of the car when new; or
- under a long-funding lease (see CA23800 onwards).
The restriction rules generally do not apply to expenditure on the hire of a car, which is either:
provided certain conditions are met - see BIM47765.