Government Extends Tax Break for “Green” Vehicles

The capital allowances (CAs) tax break for eco-friendly vehicles was due to end for companies on 31st March 2021 and for unincorporated businesses on the 5th April 2021 but has now been extended for an additional four years.

This means that businesses wishing to invest in a green car now have until 2025 to take advantage of this benefit.

Vehicles which qualify include:

· New and unused zero-emission cars, vans and lorries.

· Electric vehicle charging points

· Gas refuelling equipment

Expenditure on these assets will qualify for first year allowances (FYAs), meaning that a CAs tax deduction for 100% of this expenditure will be available within the accounting period that the purchases are made.

HOWEVER, if your accounting year includes the 31st December 2021, you could inadvertently use part of your AIA (annual investment allowance) entitlement which provides similar tax relief (essentially CAs on 100% of expenditure excluding cars) due to some of the rules around AIA reducing to £200,000. It is, therefore, important to identify and keep record of all purchases and expenditure which qualify for the CA tax deduction.

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