Capital Allowances Act 2001 section 78

Effect of partial depreciation subsidy

Section 78 explains how capital allowances on a car must be adjusted when someone else reimburses part of the depreciation cost and that reimbursement is not taxable income.

• Where a car subject to the special car rules is used in a qualifying activity and a non-taxable payment is received that covers part of its depreciation, capital allowances and balancing adjustments must be reduced to a just and reasonable amount.
• Any reduction made to writing-down allowances under this section is ignored when calculating the unrelieved qualifying expenditure carried forward to the next period.
• The adjustment takes effect from the chargeable period in which the partial depreciation payment is first received, and continues for all subsequent periods.
• Where this section applies, the general partial depreciation subsidy rules in Chapter 16 do not apply, so section 78 operates as a self-contained provision for cars.