Income Tax (Trading and Other Income) Act 2005 section 50A

Short-term hiring in and long-term hiring out

Section 50A provides two exemptions from the normal restriction on car hire expense deductions: one for short-term hires of 45 days or less, and another where the taxpayer hires a car and then sub-hires it to a customer for more than 45 days.

• Condition A exempts car hire costs from restriction where the car is hired by the taxpayer for no more than 45 consecutive days, aggregating any linked periods separated by gaps of 14 days or fewer.
• Condition B exempts car hire costs where the taxpayer sub-hires the car to a customer for more than 45 consecutive days (again aggregating linked periods), but not where the customer is an employee of the taxpayer or a connected person, or where the customer provides a car back to the taxpayer's employee under reciprocal arrangements.
• Neither exemption applies if the hiring arrangements have a main purpose of circumventing the car hire restriction or otherwise avoiding tax.
• Where Condition B applies to only part of the hire period, the taxpayer must apportion the hire costs on a time basis between the sub-hire period and the remainder.