Corporation Tax Act 2009 section 1251

Car hire

Section 1251 restricts the tax deduction available to investment companies for the cost of hiring certain cars, by imposing a 15% reduction on the allowable amount, and sets out how any subsequent rebates or releases of hire charges are treated.

• When an investment company claims a deduction for car hire costs, the allowable amount is reduced by 15% unless the car was first registered before 1 March 2001, has low CO₂ emissions, is electrically propelled, or is a qualifying hire car.
• The 15% restriction applies to management expenses deducted under the rules for companies with investment business.
• If a rebate of hire charges is later received, or a debt for hire charges is released other than under a statutory insolvency arrangement, the clawback calculation must also reflect the 15% reduction.
• The definitions of "car", "qualifying hire car", and rules on short-term hiring in and long-term hiring out that apply to trading income also apply here, including the rule that a car is a qualifying hire car where ownership passes without the exercise of a purchase option.