DE 2Deductions for business use

1. A person is allowed a deduction for—

2. expenditure that they incur for the business use of a motor vehicle:
3. interest on amounts used to fund, directly or indirectly, expenditure the person incurs for the business use of a motor vehicle, if the person is a close company that has chosen to apply this subpart instead of the FBT rules, in accordance with section CX 17(4B)(c) (Benefits provided to employees who are shareholders or investors):
4. an amount of depreciation loss for the business use of a motor vehicle.

5. A person can choose under section DE 2B to calculate the total amount of the deduction described in subsection (1)—

6. under subsections (2) and (4) (the costs method) by adding together—
   1. a deduction amount for expenditure, calculated under subsection (2); and
   2. a deduction amount for depreciation loss, calculated as described in subsection (4); or
7. by using the kilometre rate method described in section DE 12.

8. The amount of the deduction allowed in an income year for the expenditure for the business use of the vehicle is calculated using the formula—

   $expenditure\; \times \; business\; proportion.$

   Where:

9. In the formula in subsection (2), business proportion is the proportion of business use of the motor vehicle for the income year, expressed as a decimal, calculated under sections DE 3 to DE 11.

10. The amount of the deduction allowed in an income year for the amount of depreciation loss for the business use of the vehicle is calculated—

11. using the formula in subsection (5), except in a case to which paragraph (b) or (c) applies; or
12. using the formula in subsection (8) if that subsection applies to the amount of depreciation loss; or
13. using the formula in subsection (11) if that subsection applies to the amount of depreciation loss.

14. The formula referred to in subsection (4)(a) is—

    $standard\; calculation\; \times \; business\; proportion.$

    Where:

15. In the formula in subsection (5),—

16. standard calculation is the amount resulting from a calculation made for the motor vehicle under section EE 16 (Amount resulting from standard calculation):
17. business proportion is the proportion of business use of the motor vehicle for the income year (expressed as a decimal) calculated under sections DE 3 to DE 11.

18. Subsection (8) applies when—

19. the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2) (Effect of disposal or event); and
20. the person’s amount of depreciation loss for the motor vehicle was, at a time when the person owned it, calculated under subsection (5).

21. The formula referred to in subsection (4)(b) is—

    $disposal\; depreciation\; loss\; \times \; all\; deductions\; ÷\; (base\; value\; -\; adjusted\; tax\; value).$

    Where:

22. In the formula in subsection (8),—

23. disposal depreciation loss is the amount resulting from a calculation made for the vehicle under section EE 48(2):
24. all deductions is all amounts of depreciation loss relating to the vehicle for which the person has been allowed a deduction in each of the income years in which the person has owned the vehicle:
25. base value has the applicable one of the meanings in sections EE 57 to EE 60 (which relate to base value):
26. adjusted tax value is the vehicle’s adjusted tax value on the date on which the disposal or event occurs.

27. Subsection (11) applies when—

28. the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2); and
29. the motor vehicle starts to have a business use in the same income year as that in which the amount of depreciation loss arose.

30. The formula referred to in subsection (4)(c) is—

    $disposal\; depreciation\; loss\; \times \; business\; proportion.$

    Where:

31. In the formula in subsection (11),—

32. disposal depreciation loss is the amount resulting from a calculation made for the vehicle under section EE 48(2):
33. business proportion is the proportion of business use of the vehicle for the income year calculated under sections DE 3 to DE 11, expressed as a decimal.

34. This section supplements the general permission and overrides the private limitation. The other general limitations still apply.

Compare

• 2004 No 35 s DE 2

Notes

• Section DE 2(1)(ab): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
• Section DE 2(1B) heading: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
• Section DE 2(1B): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
• Section DE 2(3): amended, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(3) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
• Section DE 2(6)(b): amended, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(4) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
• Section DE 2(12)(b): amended, on 1 April 2017 (applying for the 2017–18 and later income years), by section 73(5) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).