In the 2008 Budget the Chancellor set out changes that will be made to the current Writing Down Allowance (WDA) and Expensive Car Leasing Disallowance (ECLD) regulations. Changes to these had been expected to bring them in line with the Government's environmental agenda – and we were not disappointed.

With effect from 1 April 2009, the capital allowance treatment of all cars will be reformed. Expenditure on cars with a CO2 rating above 160g/km will attract 10% WDA, while those with 160g/km or below will attract 20% WDA.

In addition, the current concept of an 'expensive car' (over £12,000 retail cost) has been discarded. Instead there will be a single disallowance of 15% applied to any car with an emissions level above 160g/km. Any car which falls below the 160gkm threshold, irrespective of cost, will suffer no ECLD at all.

As a result, many of the more expensive cars which previously faced an ECLD in excess of 15% will become a more attractive leasing option than was previously the case. Additionally, those vehicles in the sub 160g/km category will carry no ECLD at all – again making leasing a more attractive option than if they had still been classed as 'expensive' cars.

A number of vehicles will be adversely affected as they previously may have carried an ECLD of less than 15%. However, these vehicles (typically in the £12,000 to £17,000 retail price range) would still have been more attractive as a lease option than a purchase option (due to the underlying VAT advantage).

So the overwhelming message is that, with a few exceptions, the lease option will become most appropriate for most cars.

April 2009 is not very far away and this is a complex area where all fleets need professional guidance – particularly if they purchase any of their vehicles rather than leasing them. To support this LeasePlan will provide further information and guidance as the detail of the legislative changes becomes clearer over the coming weeks.