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Riding Your Motorcycle Home on a Business Tax Saving

by

melaverty

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: Motorbike Car Base Value Market Value or Purchase Price List Price When New % for Cash Value Fixed 20% Between 10% & 35% Fuel Benefit Fixed 20% of Usage Base 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.

If you have a business and require specific assistance regarding tax savings for limited companies or for any other accounting matter, then please contact Gower Leicester Accountants on 01162 206019 or visit our website www.accountantsleicester.net

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Riding Your Motorcycle Home on a Business Tax Saving