Finance Act, 1976

Restriction of deduction in respect of vehicles.

32.—(1) In this section—

“qualifying expenditure” means the amount of expenditure incurred in relation to a vehicle (within the meaning of section 30 of the Finance Act, 1973 ), being expenditure which, but for the provisions of this section—

(a) would be allowable as a deduction—

(i) in the computation of the profits or gains chargeable to tax under Schedule D of the trade, profession or business in the course of which the vehicle is used, or

(ii) in the computation of the profits or gains chargeable to tax under Schedule E from an office or employment in the performance of the duties of which the vehicle is used,

or

(b) would be taken into account for the purposes of a claim in respect of expenses of management under section 15 of the Corporation Tax Act, 1976 , or that section as applied by section 33 of that Act;

“relevant cost”, in relation to a vehicle provided for the purposes of a trade, profession, business, office or employment, means—

(a) in a case where the vehicle is purchased by the person providing it, the actual cost to that person of providing the vehicle, or

(b) in a case where the vehicle is not purchased by the person providing it, the retail price of the vehicle at the time it was first provided for use by that person.

(2) Where, for any year of assessment or accounting period, a deduction is claimed by any person in respect of qualifying expenditure and that expenditure is incurred—

(a) in respect of a vehicle the relevant cost of which exceeds £3,500, and

(b) in respect of a period subsequent to the 28th day of January, 1976,

the amount of the deduction to be allowed in respect of that qualifying expenditure shall be reduced—

(i) by one-third of the amount by which the relevant cost of the vehicle exceeds £3,500, or

(ii) where that person so elects, by an amount which bears to the amount of the qualifying expenditure the same proportion as the excess of the relevant cost of the vehicle over £3,500 bears to the relevant cost of the vehicle:

Provided that, in a case where paragraph (i) applies and the period in respect of which the qualifying expenditure is incurred is part only of a year, the amount by which the deduction is to be reduced for that period by virtue of the said paragraph (i), shall be reduced in the proportion which that part of the year bears to a year.