374 Capital allowances for cars costing over certain amount

(1) The wear and tear allowances for motor cars costing in excess of the specified amount are to be restricted to what they would be if the actual cost were taken, for the purposes of section 284 (that is, the section which provides for wear and tear allowances), to be the specified amount.

(2) The wear and tear allowances to be taken into account in computing the “expenditure still unallowed” for the purposes of balancing allowances and balancing charges are to be the allowances as so reduced. Any balancing allowance or balancing charge is to be computed on the basis that the original cost of the car was the specified amount.

(3) Where the car is put out of use and there are sale, insurance, salvage or compensation moneys received or deemed to have been received, those moneys are reduced in the proportion which the specified amount bears to the cost of the car for the purposes of the balancing allowance or balancing charge.

(4)(a) Where the car changes hands otherwise than by sale in the open market, the allowances to the new owner are to be scaled down in the proportion which the specified amount bears to the actual cost of the car to the previous owner.

(4)(b) Where there is a chain of transfers to which these provisions apply, the reduction to be applied to the deemed proceeds of sale at each successive transfer is in the proportion which the specified amount bears to the cost of the car to the first owner in the chain. This applies so long as there is no sale in the open market.

(5) Where a trader elects to have the wear and tear allowances on a car computed on the amount by which the cost of the car exceeds the balancing charge which might have been made in respect of the car it replaced, the cost of the car bought in replacement is first restricted to the specified amount before the balancing charge on the old car is deducted.

(6) Where the taxpayer purchasing a car costing more than the specified amount receives a subsidy directly or indirectly from the State or a public authority so that the expenditure to be taken into account for the purposes of balancing allowances and balancing charges is the net expenditure only, the net outlay is to be restricted in the proportion which the specified amount bears to the gross cost of the car.

Relevant Date: Finance Act 2019