You will be happy to know that the treatment of your motorbike, within your business affairs, for tax purposes is much more favourable than your motor counterparts and whilst owning a company car is an expensive business, owning a company motorcycle isnt. Javeed Baig of Gower Accountants in Leicester explains why.
Assuming you are VAT registered, you can claim upto 100% of the VAT paid on the purchase of your beloved bike. This is on the basis that you use the motorcycle only for business purposes. With a car, no matter how much you use it for business you cannot reclaim the VAT.
Motorcycle Tax Benefits
Having purchased your motorcycle, you can claim a deduction against tax for the full purchase price in your year of purchase using part of your Annual Investment Allowance of 50,000. A car typically would attract an annual writing down allowance of only 20% per year. In corporation tax terms, for the small business, this represents a saving of 21%.
Assuming the VAT reclaim and the corporation tax relief thats a whopping 36% off the purchase price of your motorbike. So you could choose to take the saving, or maybe trade up and get that mean machine that you have always promised yourself.
As with a car it is unlikely that you will use your motorcycle only for business and therefore a private use element will occur. Take the assumption that 75% is used for business and 25% is used privately. This 25% is the benefit you have derived from using a company asset and as a result a Benefit in Kind charge will arise on both the company and on you as an individual. How this benefit is calculated is where the magic lies and its where motorcycles ownership thrives and company cars dive.
The basic differences are as follows:
Base ValueMarket Value or Purchase PriceList Price When New
% for Cash ValueFixed 20%Between 10% & 35%
Fuel BenefitFixed 20% of UsageBase 14,400 fixed
Heres an example of the potential tax benefits:
Motorcycle costs 8,000. 25% private & 75% business.
Cash Value of benefit in kind : 1,600
Reduction Due to Business Usage : 1,200
Taxable Benefit : 400
400 represents your cash value of the benefit from using the company bike. If you are a basic rate taxpayer you will pay 80. The company will pay a further 51.20 National Insurance on this.
The equivalent tax position regarding a company car is as follows:
Car Cost 8,000 List price 16,000. Some private use assumed. CO2 = 20%
Cash Value of benefit in Kind : 3,200
Reduction due to Business Usage : N/A
Taxable Benefit : 3,200
Tax At Basic Rate : 640 Company Charge : 410
Moving back to motorcycles you can see the savings on purchase would far exceed the annual cost of owning your bike through a company.
Additional Tax Benefits
In addition all safety equipment, insurance and fuel can all be paid for by the company with the Benefit in kind calculated in much the same way.
The article has been written for information purposes only and does not constitute formal advice. The rates are those prevailing at the time of writing and are subject to change.