I've already taken my "19%" allowance for the year
Limited Company purchase of motorcycle
- Thread starter Clive
- Start date
Just been to my accountant and it aint as wonderful as it seems.
The beneifit is not only on the replacement/new value of the bike (say 10,000 grand) but also on any money spent on the bike, so all servicing costs, repairs, insurance and tyres must be added to the 10k, then you will be taxed on 20% of that value.
This did not sound logical but she was quoting from some tax bible and it did sound quite clear. Apparently bikes are in the same class as yatchs and planes. There are apparently ways of getting round these things with planes and yatchs by chartering them out for part of the year, but not much that can be done for bikes.
In addition, she thinks you also have to pay employees NI on the value of the benefit, which is 11% of the 20% of the total benefit.
The wife is going to query all the above with some other accountants she knows, but has anyone else been told anything similar?
The beneifit is not only on the replacement/new value of the bike (say 10,000 grand) but also on any money spent on the bike, so all servicing costs, repairs, insurance and tyres must be added to the 10k, then you will be taxed on 20% of that value.
This did not sound logical but she was quoting from some tax bible and it did sound quite clear. Apparently bikes are in the same class as yatchs and planes. There are apparently ways of getting round these things with planes and yatchs by chartering them out for part of the year, but not much that can be done for bikes.
In addition, she thinks you also have to pay employees NI on the value of the benefit, which is 11% of the 20% of the total benefit.
The wife is going to query all the above with some other accountants she knows, but has anyone else been told anything similar?
Looking at the posts on this thread it would appear that everyone is doing things differently to each other and possibly being advised differently by accountants that are interpreting the rules in different ways.
When I started to look into this, I tried searching the HMRC website for the official statements/leaflets etc, but I couldn't find any references to do with motorcycles. Makes me think (as someone has already mentioned) that bikes will come under other rules such as plant and machinery or yachts and planes as mentioned below (whatever class they are in!).
Does anyone know of a reference source where these things can be looked up and researched?
When I started to look into this, I tried searching the HMRC website for the official statements/leaflets etc, but I couldn't find any references to do with motorcycles. Makes me think (as someone has already mentioned) that bikes will come under other rules such as plant and machinery or yachts and planes as mentioned below (whatever class they are in!).
Does anyone know of a reference source where these things can be looked up and researched?
Piglet
Guest
I run a large business and use BOTH my bikes for personal and business. We reclaim VAT on everything purchase, accessories and fuel and it doesnt appear on the P11D as a benefit in kind so no tax, no NI and no contributions. Bikes are not cars, or indeed planes or boats. They are a necessary business tool the same as a laptop. mobile phone, desk or pneumatic drill and are depreciated at 25% per annum and offset against Corporation Tax like every other business asset.
Tell your accountant to find where one business asset is treated differently to another.
It does of course help if you dont have a desk job, but most small business owners/contractors need to travel to see clients etc at some stage....
Tell your accountant to find where one business asset is treated differently to another.
It does of course help if you dont have a desk job, but most small business owners/contractors need to travel to see clients etc at some stage....
If there is no element of personal use it doesn't appear on P11D, but *any* business asset, even computers, used for personal use can attract a P11D "charge".
Piglet
Guest
Yes. The government will welcome you to declare as must as you wish on your P11D and lets face it they are not programmed to decline any offer of tax.
I cant think of anyone who would put or accept "personal use of company laptop" on their P11D. How do you calculate the benefit? Originally when company mobile phones were first about, the HMRC tried to enforce tax for personal use, this was scrapped as totally un-workable.
Cars are wrapped in rules as we all know, but there are no "specific" rules for bikes...yet. As as this thread illustrates everyone is just guessing - or in the world of the accountants playing safe cos they dont want to be seen as taking a risk just in case and are applying some sort of benefit in kind logic that resembles the car/boat/plane/yacht rules which deal with items (perks) that were principly given to people to avoid tax/ni.
The reason there are no rules is that the number of bikes actually owned and operated by VAT registered companies is a handful at most, and of those, most are courier companies who operate a fleet where the bike is an instrinsic part of the business and riders are therefore similar to van drivers/tradesmen. If they forced bike riders to pay tax the same would apply to thousands of van drivers and tradesmen who drive home etc - it would have huge negative impact.
The total tax opportunity on bikes just doesnt warrant the revised legislation or risk so its a legitimate loophole. But like most loopholes, you have to make your own mind up as to wether the gain out weighs any potential risk
A
There are specific rules for bike, they are treated the same as planes and yatchs, my accountant read out the section from her accountants bible and under a certain category it stated planes, yatchs and motorbikes.
No idea how it works for courier companies, but I would guess they are treated differently.
LIke most of the tax issues, everyone seems to do it slightly differently. If you're been getting away with it for years it doesn't mean its right or wrong, it could just be they haven't had a close look at you yet.
No idea how it works for courier companies, but I would guess they are treated differently.
LIke most of the tax issues, everyone seems to do it slightly differently. If you're been getting away with it for years it doesn't mean its right or wrong, it could just be they haven't had a close look at you yet.
Clive
If you take dividends which cause you higher rate liability then they are charged at 32.5% less the 10% credit which is attached. Dividends are not charged at 40%. The effect of the 32.5% is that the additional tax you pay works out at a quarter of the net dividend. So to get £14400 in pocket you need a dividend of £19200.
As regards P11d entries its generally the availability of the asset that causes a charge and not the actual private usage.
As to whether its best for the bike to be in or out of the coy it depends on individual circumstances and the numbers need to be crunched accordingly!
The varieties of answers here show that. Although I think some have misunderstood the rules involved ( would not suggest any were being dishonest
) Its a few years since I have had to do tax planning for this situation but my fading memory suggests thats its best to take the bike out after 4 years or so
as the 20% annual charge suffered can be deducted from the benefit assessable when bike transferred to the director personally. The last time I did planning in this respect it was for some very expensive Harley and the guy still owns it ..............
Nige (wishing he could leave work where it belongs!)
Would be very interesting to compare mileage sheets which should be kept for inspection unless of course you do not have a company car or claim mileage allowance for use of personal car.
Motorcycles also have a set mileage allowance
I was advised not to get a bike on the company - it was easier and more cost effective to take a dividend and buy as a personal asset rather than company asset.
Accountants have a duty to disclose any suspected dodges and if they do not they will also be reprimanded
Also is dependent upon time of year that you file your company year end as to the chance of being investigated.
Also IR have the power to go where most other people cannot so reading an open forum gives interesting reading.
Motorcycles also have a set mileage allowance
I was advised not to get a bike on the company - it was easier and more cost effective to take a dividend and buy as a personal asset rather than company asset.
Accountants have a duty to disclose any suspected dodges and if they do not they will also be reprimanded
Also is dependent upon time of year that you file your company year end as to the chance of being investigated.
Also IR have the power to go where most other people cannot so reading an open forum gives interesting reading.
Seems specific enough...
From Chapter 4 & 6 of the Tax Guide
Section 4.3...
Benefits and facilities include:
• the use of any asset provided by the employer or another person acting on the employer’s behalf, for example, the use of a motorcycle, an aircraft or yacht, or of furniture or a TV set. The way in which the benefit from the use of such an asset is valued is described in paragraph 6.7 except for cars which are considered in Chapters 11-13, vans which are considered in Chapter 14 and mobile phones
which are considered in Chapter 22
Section 6.7
The initial cost of an asset of the kind mentioned in paragraph 4.3 used by an employee is not treated as remuneration if the asset remains the property of the employer or of the person making it available for the use of the employee. In such a case the annual value of the use of the asset (or the rent or hire charge paid for it if this is greater) plus any current expenditure met by the employer or the person making the asset available, will count as remuneration of the employee. The annual value is taken as 20% of the market value of the asset when it was first used to provide a benefit. Where an asset was first used to provide a benefit before 6 April 1980 the annual value is taken at 10% (not 20%) of its market value when first applied as a benefit. As indicated in paragraph 4.3 different rules apply to mobile phones, vans and cars.
spot on. The exact paragraphs my accountant read out to me. There were 3 of us there and we all agreed it meant that bikes were treated in the same group as yatchs and planes and that any money spent on the bike during the year (service, tyres etc) would count towards the benefit of which you would have to pay tax on 20% of.
What we didn't find out was if the benefit was subject to NI. Didn't bother doing that as we decided it was not best to get the bike through the company this year.
Yoda
Registered user
Yep. This type of benefit on the P11D should get carried forward as the Class 1A NI Contribution. ie the company pays out 12.8% as the Employer's NIC.
Great isn't it. By the gonads which ever way you turn.
Yep. This type of benefit on the P11D should get carried forward as the Class 1A NI Contribution. ie the company pays out 12.8% as the Employer's NIC.
Great isn't it. By the gonads which ever way you turn.
Which after coy tax relief on the NIC would work out at approx £307 per annum for a £15000 bike. Disgusting isn't it, makes you want to forego all those tax benefits you get from operating as a limited company and go back to being a sole trader and taxed at a minimum of 28% on your profits!
Almost makes you feel sorry for those that have to finance bikes from their NET wages......................
So lets have a worked example on a first years expenditure on a bike including accessories, clothing, servicing, tyres etc, but not fuel, for a small one man limited coy.
Say Expenditure is £15,000 +vat
What would be the tax relief (is this now subject to 100% write off in the first year??) on coy profits?
What is the employers taxation?
What is the employees taxation?
What is the net saving?
Anyone with a calculator?
Say Expenditure is £15,000 +vat
What would be the tax relief (is this now subject to 100% write off in the first year??) on coy profits?
What is the employers taxation?
What is the employees taxation?
What is the net saving?
Anyone with a calculator?
My (simplistic) sums don't take into account VAT - I'm on the lower fixed rate scheme and I'm sure that will complicate matters
Assume a £10,000 motorcycle, kept for 2 years, then sold for £7,500.
PAYE
11% NIC Employee
12% NIC Employers
20% Income Tax
Need to pay approx £17,550 therefore taxman gets £7,550
So overall the bike has "cost" you £7,550 in tax/NI + £2,500 in depreciation i.e. £10,050
Company
20% BIK is a "tax cost" of £1,280 over two years (20% of £10,000 * (20%+12%) * 2years)
50% company write off over two years means you can pay the £2,500 "profit" to yourself, which is taxed etc.
So overall the bike has "cost" you £1,280 BIK tax + £1,075 PAYE tax + £2,500 in depreciation i.e. £4,855
(This figure also assumes 100% private use)
I don't think thats realistic given the individual variables that would need to be factored in. My gut feeling is that its prob better to leave a bike out of the coy but I don't have time or inclination to crunch the numbers for each case!
The 100% write may be available but bear in mind what happens when you sell bike. The amount of 100% "write off" it will be possible to claim will depend on your coy accounting year!
Why not just take a dividend of £17625 (bike +VAT) and buy the b****y thing? The additional tax payable would be no more than £4407. If you took dividend now the tax would be payable on 31st Jan 2010 and you could take a further dividend then to pay the tax. Get your accountant to crunch your particular numbers for you to make sure its feasible
Going back to the start of the thread and the 25 p per mile issue, a bike can be treated the same way as a car in terms of business use. Own the car / bike yourself and you can pay yourself expenses based on 29 p per mile at current rate (just told that by my biking accountant) with no tax obligation. You should note that this covers everything - private ownership, depreciation, running costs etc., although it should be OK to claim business related items like panniers, sat nav etc. direct on the company (limited or not). As long as the claimed mileage doesn't exceed the bike's actual mileage and you keep a basic record of business trips, this is a very simple way to go and avoids any risk of an upset revenue inspector.
Piglet.
I you have bought two bikes through the business and use them for private use you could be in for a big tax issue and unlike anyone else you are presumed guilty until you prove yourself innocent ( they can go back six yrs and claim the tax you have not paid ).
If your accountant has told you it is ok then atleast you may be able to sue them if things get out of hand.
I you have bought two bikes through the business and use them for private use you could be in for a big tax issue and unlike anyone else you are presumed guilty until you prove yourself innocent ( they can go back six yrs and claim the tax you have not paid ).
If your accountant has told you it is ok then atleast you may be able to sue them if things get out of hand.
The 2008 tax guide still mentions 24p per mile.
Similar threads
