Where a business pays to hire (lease) a car, tax relief is in principle due for that cost. However, relief for the hire costs is restricted in certain circumstances (CTA 2009, s. 56–58B). Major changes to the rules apply from April 2009 (see below).
The rules for restricting leasing costs mirror, to an extent, the restrictions that apply to capital allowances for cars (see ¶238-500ff.). However, any restriction on leasing costs is permanent, whereas the capital allowance restrictions merely delay the timing of tax relief for expenditure on cars.
Rules applying after April 2009
With effect for leases broadly entered into on or after 1 April 2009, there is a fixed 15 per cent restriction.