The Tax pros and cons of Company Motorbikes

If you fancy taking to the open road on two wheels, why not get your company to buy you a motorcycle? What tax charges and reliefs will apply?

Cars v motorbikes

In recent years cars have become less tax efficient as a company perk, especially when you’re the owner of the business providing the car. It gets even less tax efficient where your company also pays for fuel used for personal journeys. Tax and NI are calculated depending on the car’s CO2 emissions and list price when new. By comparison the rules for motorbikes are far simpler.

Easy rider

Motorbikes are classed as plant and machinery, not cars, and so the taxable benefit in kind (BiK) is calculated using HMRC’s general rules for the provision of assets. These say that the BiK is 20% of an asset’s value when it’s first provided as a perk. This can result in a relatively low tax and NI cost compared with a company car of similar value.

Company NI costs

Your company has to pay Class 1A NI at 13.8% on most perks, including cars and motorbikes. Using the figures from our example the Class 1A NI payable on the motorbike and fuel is just £110, compared with a massive £2,216 for the car and fuel.

Tax-efficient BiKs

Where in 2018/19 your total remuneration including BiKs (but not dividends) is no more than £11,850, you won’t pay any tax at all on the benefit. If you plan the purchase of a motorbike well you can keep the BiK below your tax-free allowances, meaning that there will be no tax for you to pay on it.

Trap: Unlike cars, the cost of insurance, maintenance, etc. adds to the taxable BiK.

Expense/cost Amount BiK
Motorbike £7,000 £1,400
Fuel £800 £800
Insurance, repairs, etc. £800 £800

The total BiK for 2018/19 is therefore £3,000 and as long as his projected figures for costs remain on budget the motorbike will be a tax and NI-free perk.

Tip: Where there is no taxable perk for you there is also no Class 1A NI liability for the company. The company can deduct all the costs from its tax bill and – as another advantage over cars – it can reclaim any VAT it pays on the purchase.

For more information, we provide a Business Consultation to ensure our clients benefits from tax planning and accounting matters.

Companies999 are Chartered Certified Accountants and Birmingham’s Best Company Formation Agent.

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