Can I Buy a Motorcycle as a Business Expense

You, as the owner of a corporation, have the opportunity to make a purchase of a motor vehicle through that organization. This may be helpful, particularly if you require the motorbike for your day-to-day activities. Before making a final decision on a vehicle, it’s essential to research the various models and makes on the market and your potential tax implications.

In addition, insurance firms are notorious for failing to pay motorcyclists the appropriate reimbursement following an accident. Having motorcycle accident lawyers on your side is crucial for this reason alone.

The good points of a company motorbike

Let’s first go over some advantages of having a company motorcycle. In general, purchasing a bike is governed by simple rules.

The value-added tax can be recouped in its whole if the motorcycle is purchased either outright or on hire purchase. Regarding your annual investment allowance, you can deduct the total amount you spent on the automobile from your earnings.

Although the regulations change slightly when you buy a vehicle through a lease, you can still get a refund on the value-added tax you forked over to cover your lease, and for tax purposes, you can deduct the leasing payment. 

To qualify for annual investment allowances, the motorcycle must be purchased with a business credit card, and the invoice must be issued to the firm.

As a bonus, your company can cover all your reoccurring motorcycle expenses, including insurance, taxes, gas, and maintenance, and sometimes even reimburse you for VAT.

Drawbacks of Using a Company Motorcycle

The catch is that HMRC will see the gift of a motorcycle and any associated expenses as a taxable advantage.

This is equivalent to 20% of the cost of the motorbike and accessories (including VAT) each year in addition to all the annual running costs unless it is used 100% for business reasons. 

According to the taxman, the firm has provided you with a benefit in kind, the value of which will be taxable on you. If you use your motorbike even once for a private excursion, then the value of the benefit in kind will be chargeable to you.

It cannot be easy to provide definitive proof of exclusive business use. If most of your job takes place in your home, you must make frequent trips to the site and exclusively use your motorcycle. 

For this reason, it is possible for you to ride a bike to work. However, like a distance record book, you’ll need proof and be ready to argue with the tax man if he asks. In most cases, travel to and from a job location is not tax deductible as business expenses unless temporary housing is provided.

On top of that, the organization would be required to pay 13.8% Employers Class 1A National Insurance on the benefit in kind declared on the P11D. (b).

It is more cost-effective to buy the motorcycle outright and bill the business at the allowed mileage rate of 24p per business mile if you rack up many miles. Likewise, be cautious when tallying up business-related miles driven. 

Keep in mind, as was said before, that travel expenses from home to a permanent place of work are considered to be commuting, and as a result, business mileage cannot be claimed for this type of travel.

In conclusion

It takes work to do the math. If you can demonstrate that the vehicle is used entirely for business purposes, purchasing a motorcycle through your company may be a good option for company directors because it entitles them to several tax benefits that may be claimed immediately.

If, on the other hand, you are required to pay benefit tax, the calculations get more complicated, and it may be simpler for you to own the motorcycle privately and charge for the mileage simply. 

When you run the numbers, the positive aspects balance the negative aspects from a tax point of view.

Nevertheless, if the organization has cash reserves that need to be put to good use, then this could still be an effective strategy to move forward.  But before making any final decisions, you should run the numbers through a trusted advisor.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.