The UK government has announced its intention to introduce legislation as part of the Finance Bill 2017 to extend the period of application of the First Year Allowance (FYA) for companies purchasing low emission cars. The 100% FYA was originally planned to continue until 2018 but the legislation now planned will extend the availability of the allowance until 31 March 2021. This measure is designed to support the transition to ultra low emission vehicles to improve the environment and air quality.
The main rate threshold for emissions for granting capital allowances for business cars is to be reduced to 110 grams per kilometer (g/km) of CO2 and the threshold for emissions for cars qualifying for the 100% FYA is to be reduced to 50 g/km from 1 April 2018.
The threshold for applying the restriction on tax deductibility of lease rentals is to be lowered in line with the main rate emissions threshold with effect from 1 April 2018. Leases beginning before 1 April 2018 will continue to be subject to the existing emissions threshold for tax deductibility of the lease payments.
