286 Increased wear and tear allowances for taxis and cars for short-term hire

Summary

This section provides for a 40 per cent annual rate of wear and tear allowance, on a reducing balance basis, for taxis and cars provided for short-term hire to the public. This compares with the normal 12.5 per cent annual rate given on a straight-line basis over 8 years under section 284 for motor vehicles generally. The increased rate of allowance is not available for car leasing.

Details

Definitions and construction

(1)(a) “car” is defined to include only vehicles normally used as private cars. The definition excludes vehicles which are not road vehicles (such as fork-lift trucks), vehicles designed for haulage or to carry goods (such as tow-cars or lorries) and vehicles not normally used as private vehicles (such as motor coaches or minibuses). Taxis have been specifically included in the definition (by reference to paragraph (ii) of the definition of “qualifying purposes”) since “black taxis” or “London taxis” as they are sometimes referred to would not normally be used as private cars.

“qualifying purposes” is defined as the use in the ordinary course of a trade of cars —

• for the purposes of short-term hire to members of the public, or
• as taxis.

“Taxi” is defined as a car which is a licensed public hire vehicle fitted with a taximeter. This definition excludes public hire vehicles without taximeters, sometimes referred to as “hackneys”. It also excludes limousines typically used for weddings and funerals.

“short-term hire” is the hire of a car to a person under a hire-drive agreement for a continuous hire period which does not exceed 8 weeks. This means the hire of the car from its registered owner but excludes —

• a hire-purchase agreement,
• an agreement for carriage of persons or goods without the car itself being hired, and
• hire of the car where the owner drives or provides a driver for the vehicle.

(1)(b) Where a period of hire of a car to a person is followed within 7 days of the end of that period by another period of hire (whether of the same or a different car) to the same person or a connected person (see section 10), the number of periods of hire, though each is of less than 8 weeks duration, are aggregated to make up what is treated as one continuous period of hire, and where that one period exceeds 8 weeks duration none of the separate periods making up that longer period is regarded as a period of short-term hire.

Qualifying condition

(1)(c) In order to be regarded as having been used for qualifying purposes as respects any chargeable period, the car must have been used for short-term hire or as a taxi for at least 75 per cent of the time it is available for use. This is necessary in order to prevent, say, a leased car qualifying for the relief on the basis of an incidental use for short-term hire.

(1)(d) The “75 per cent” requirement is regarded as having been satisfied in a period where only 50 per cent of the use of the car is for qualifying purposes if in the immediately preceding or following period 75 per cent of the use of the car is for qualifying purposes. This easing of the “75 per cent” requirement is intended to allow a reasonably flexible access to the incentive and to take account of the peaks and valleys which can occur in tourism from year to year.

Rate of wear and tear allowance

(2) The normal annual rate of wear and tear allowance under section 284 is modified so as to provide that a 40 per cent rate, on a reducing balance basis, will apply in respect of cars used for qualifying purposes in the course of a trade which includes or consists of the short-term hire of cars or the operation of a taxi.

Relevant Date: Finance Act 2019