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Government Initiatives
Government Initiatives
In this section you will find information relating to the latest Government initiatives that may be of benefit to Fleet Managers.
AIA
CO2 based allowance
Lease rental restriction
Annual Investment Allowance
On April 1 2012, Annual investment allowance (AIA) will be changing. AIA replaced the previous capital allowance system in April 2008 and is effectively a 100% first-year allowance for business expenditure on all assets categorised as plant and machinery, including commercial vehicles.

Currently this allowance enables fleets to write off expenditure up to £100,000 annually, but from April 1 2012 this allowance will drop to £25,000.

This means that the value of any vans (as well as qualifying plant and machinery) acquired each year up to the value of £25,000 can be fully written off against tax.

How the Annual Investment Allowance will work
All commercial vehicles are claimed at 20% p.a. on a reducing balance basis except for the tax year 2011/12, when 100% allowance can be claimed on the first £100,000 of expenditure. However, from April 2012 this will be reduced to the first £25,000 of expenditure.

Where a business has a chargeable period that spans the operative date of the decrease, the maximum allowance for that business's transitional chargeable period comprises two parts:
  1. the AIA entitlement, based on the previous £100,000 annual cap for the portion of a year falling before the relevant operative date.
  2. the AIA entitlement, based on the new £25,000 cap for the portion of a year falling on or after the relevant operative date.
To find out more about the changes in AIA, simply follow this link.
 
CO2 emissions-based capital allowance
Basically, capital allowances are generally claimed on purchased assets based on the purchase price. For cars, the amount is dependent on CO2 emissions. The amount claimed for cars and commercial vehicles is referred to as the Writing Down Allowance.

The current Writing Down Allowance
  • During the first year cars with CO2 emissions of 110g/km and below have an allowance of up to 100%.
  • During the first year cars with CO2 emissions of 111g/km to 160g/km have an allowance of up to 20%.
  • During the first year cars with CO2 emission of above 160g/km have an allowance of up to 10%.
And the Writing Down Allowance for next year
From April 2012, the rates for cars with CO2 emissions above 111 g/km will be reduced by 2%.
  • The Writing Down Allowance for vehicles with CO2 emissions of 111-160 g/km will drop from 20% to 18%.
  • The Writing Down Allowance for vehicles with CO2 emissions of more than 160 g/km will drop from 10% to 8%.
To find out more about the business car taxation reform overview, simply follow this link.
 
Lease rental restriction
Along with the capital allowance reforms, legislation has also changed affecting the amount of a car’s leasing costs that can be offset against tax.

New changes from April 1 2012, also based on emissions of CO2, mean contract hire and leasing becomes more attractive as a funding method for cars with CO2 emissions of 160g/km or less are subject to a 15% rental disallowance.

To find out about tax relief for expenditure on cars, simply follow this link.