Annual investment allowance and taxi cabs
A common question on the Technical Advisory helpline is 'My client is a taxi driver and has bought a new cab during the year. What is the capital allowances position?'
In short, the answer depends on whether the vehicle is a black cab or a mini-cab.
Annual investment allowance
Finance Act 2008 introduced a new allowance on plant and machinery called Annual Investment Allowance (AIA). AIA gives an initial allowance of 100% on expenditure on qualifying plant and machinery, up to certain monetary limits. (For further details, see ACCA’s Guide to The Capital Allowances Regime.
Annual investment allowance is available on the purchase of qualifying plant and machinery. Capital Allowances Act (CAA) 2001, s38B specifically excludes cars (as defined by CAA 2001, s268A) from being eligible for AIA.
CAA 2001, S268A defines a car as a mechanically propelled road vehicle other than:
(a) a motor cycle,
(b) a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or
(c) a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.
As a result of s268A(c), the majority of mini-cabs - including MPVs - would therefore not be eligible for AIA and, consequently, only writing down allowance may be claimed. For further details on the capital allowances treatment of cars generally, see ACCA’s Guide to The Capital Allowances Regime.
So where does that leave Hackney carriages? A black cab is of course of a vehicle of a 'type not commonly used as a private vehicle' but is it 'unsuitable for such use'?
The answer may be found in HMRC Manuals, CA23510, which states that Hackney carriages should not be treated as cars for capital allowances purposes. Consequently, Hackney Carriages are eligible for AIA. A similar exclusion applies to driving school cars fitted with dual controls and certain double-cab pick-up trucks. Further details available here.