People tend to automatically think of cars when it comes to a company vehicle, but could a motorcycle be a good vehicle to use for your business? A company motorcycle could actually be an intelligent alternative to consider, particularly when you look into the financial benefits of a motorcycle compared to a company car.
In terms of tax benefits, a motorcycle could be a good option. Benefit in kind tax is based on automobile CO2 emissions, but when it comes to company motorcycles, you will find that 20% of the purchase price (including VAT) is used to calculate the benefit in kind tax. Additionally, the tax rule is based on the purchase price as opposed to the list value of a vehicle when new, which means that buying a new motorbike is usually more affordable than buying a used car.
You will also find that motorcycles are generally much cheaper to buy and run compared to a company car. Buying even a used vehicle can be at a huge cost and be hard to manage as a business, plus you will also find that a motorcycle is much more fuel-efficient as well as cheaper to both insure and maintain.
National Insurance Contributions Due
You will also benefit in terms of national insurance contributions when you opt for a motorcycle. Businesses pay Class 1A NICs at a rate of 13.8% on most benefits, but due to them being paid on the taxable benefit in the kind levy, it means that a motorcycle is much more affordable. As an example, an £8000 motorbike would incur £220.80 in NICs while a company car that was worth the same amount would result in NIC charges of £4,300.
With a company car, you cannot recover the VAT unless you prove that the vehicle is used exclusively for business (which is often not the case for businesses). Motorcycles are considered assets and therefore the same rules don’t apply, which means that it is easy to reclaim on the purchase price (although you will have to deduct personal usage from the claim if used for non-business purposes).
Corporation Tax Relief
Following this, businesses can benefit from Corporation Tax relief on the whole purchase cost of a motorcycle with 100% Annual Investment Allowance (AIA) as these vehicles are classified as assets, unlike cars.
As you can clearly see, there is a range of financial benefits to opting for a motorcycle over a company car. Not only can you make big savings by going for two wheels over four, but you might also find that this is a highly effective way for employees to get from A to B particularly in busy areas and cities where maneuvering and parking a car can be challenging.