The Capital Allowances Act 2001 (Car Emissions) (Extension of First-year Allowances) (Amendment) Order 2021

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends sections 45D, 45DA, 45E and 104AA of the Capital Allowances Act 2001 (c. 2). These sections set out the conditions to be met to qualify for 100% first-year allowances on expenditure in respect of cars with low carbon dioxide emissions (section 45D), zero-emission goods vehicles (section 45DA) and plant and machinery for gas refuelling stations (section 45E). Section 104AA sets out the conditions to qualify for the main rate allowance on expenditure in respect of cars with low carbon dioxide emissions.

Article 3 extends the first-year allowance for cars with low carbon dioxide emissions for a further four years to 31st March 2025. It also reduces the qualifying emissions threshold for the first-year allowance from 50 grams to 0 grams per kilometre driven, in relation to expenditure incurred on or after 1st April 2021.

Article 4 extends the relief for zero-emission goods vehicles for a further four years to 31st March 2025 for expenditure incurred by a person within the charge to corporation tax and to 5th April 2025 for expenditure incurred by a person within the charge to income tax.

Article 5 extends the relief for plant and machinery for gas refuelling stations for a further four years to 31st March 2025.

Article 6 reduces the qualifying emissions threshold for the main rate allowance from 110 grams to 50 grams per kilometre driven, in relation to expenditure incurred on or after 1st April 2021 for corporation tax purposes or 6th April 2021 for income tax purposes.

Article 7 provides that section 49(1A) of the Income Tax (Trading and Other Income) Act 2005 (c. 5) and section 57(1A) the Corporation Tax Act 2009 (c. 4) shall be read as if the change made by article 6 to the emissions thresholds in section 104AA(4) the Capital Allowances Act 2001 did not have effect for expenditure incurred on the hiring of a car for a period of hire beginning before the relevant date and under a contract entered into before that date. For corporation tax purposes the relevant date is 1st April 2021 and for income tax purposes the relevant date is 6th April 2021.

A Tax Information and Impact Note covering this instrument was published on 11 March 2020 alongside the Budget Report 2020 and is available on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.