Using a Motorcycle for Business Use – Here’s the Key Considerations

When looking to create a fleet of company vehicles, most businesses look to invest in cars. However, this creates a significant financial burden in terms of procurement costs and emissions-based taxes, causing many entrepreneurs to consider alternative vehicles.

In contrast, a company motorcycle is far cheaper to purchase and operate, whilst there’s also an opportunity to achieve genuine value for your investment by using tools such as the Cap HPI.

In this post, we’ll appraise the core benefits of using a motorcycle for business use and the key considerations to keep in mind when creating a commercial fleet.

  • The Potential Tax Benefits

We’ve already touched on the issue of the CO2 emissions tax placed on vehicles, with this considerably higher when investing in a company car.

Whilst you can reduce your financial burden by purchasing a very low emission car, motorcycles represent an even more cost-effective option in the UK. The reason for this is simple; as 20% of the purchase price of a company bike (including VAT) is used to calculate the benefit in kind tax instead.

This tax rule is also based on the purchase price rather than the list value of a particular vehicle when new, meaning that investing in a company motorcycle is often more affordable than buying a used car.

  • The National Insurance Contributions Due

In general terms, all businesses pay Class 1A National Insurance Contributions (NIC) at a rate of 13.8% on most benefits.

This includes company cars and motorcycles, but because these contributions are paid on the aforementioned taxable benefit in kind levy the latter option is far more cost-effective.

More specifically, a company motorbike worth an estimated £8,000 would incur NIC charges of just £220,80, whereas a commercial car of the same value would incur disproportionately higher costs of £4,300.

This is a huge consideration, and one that should convince any entrepreneur to prioritise motorcycles wherever possible.

  • Recovering the VAT

Under the current legislation, company cars are automatically blocked on the recovery of VAT (unless they’re used 100% for business).

The same principle does not apply to motorcycles, primarily because such vehicles are considered an asset. In this instance, VAT can be recovered on the purchase price, so long as the company isn’t operating under the Flat Rate Scheme at the time of purchase.

The only other caveat here is the precise purpose of the bike, as vehicles that are used only partially for business purposes will require the owner to deduct any personal usage from the value of the claim.

Adam Hansen