Taxes Consolidation Act 1997 section 380N

Cars: provisions as to hire-purchase, etc

Section 380N sets out the tax treatment of hire-purchase contracts for vehicles within the emissions-based capital allowances regime, covering situations where the contract ends without ownership transferring and providing the basis for splitting hire-purchase payments between capital and revenue.

• Where a hire-purchase contract ends without the hirer acquiring ownership of the vehicle, all capital expenditure incurred under the contract is disregarded for capital allowances purposes.
• In those circumstances, every payment made under the contract — including the interest element — is treated as a pure hire payment and restricted accordingly under section 380M.
• Where a vehicle is provided under hire-purchase and payments must be apportioned between capital and revenue, the capital element is fixed at the outright cash sale price of the vehicle at the time the contract was entered into.
• This prevents manipulation of the capital/interest split to inflate deductible revenue expenditure by reference to a higher vehicle value at the point ownership eventually passes.