£2k pa running costs and £1,250 pa depreciation. HTH
Limited Company purchase of motorcycle
- Thread starter Clive
- Start date
£2k pa running costs and £1,250 pa depreciation. HTH
Sophisticated techiques like requesting details of income and expenditure ??
I agree though, if you are wanting to hide something, you should not be posting.
As for free exchange of ideas and understanding.....
I agree though, if you are wanting to hide something, you should not be posting.
As for free exchange of ideas and understanding.....
Old thread but a bit of an update:
Motorcycles are not entitled to the Annual Investment Allowance (nor, previously, First year allowances). So they can only be written down by 20% of the written down balance each year rather than getting 100% allowance in the first year.
A lot of websites including Accountants websites are wrong on this. For capital allowance purposes (but not for VAT, etc), motorcycles are treated as cars.
Motorcycles are not entitled to the Annual Investment Allowance (nor, previously, First year allowances). So they can only be written down by 20% of the written down balance each year rather than getting 100% allowance in the first year.
A lot of websites including Accountants websites are wrong on this. For capital allowance purposes (but not for VAT, etc), motorcycles are treated as cars.
Capital Allowances Act 2001 Section 81 - see the throwaway line at the bottom. There was an article on an accounting website which made passing reference to it. I've checked it through to the original legislation and it seems pretty clear. Amazing how much incorrect advice is out there on professional websites stating that M/cs are treated as P&M for CA purposes!
M/Cs are also excluded from low emission allowances as well (whether or not any fall below 120/110g per km).
M/Cs are also excluded from low emission allowances as well (whether or not any fall below 120/110g per km).
So if m/c's are now treated as 'cars' what parts of Chapter 8 would apply where the purchase price of the m/c is under £12000?
74(2)(b) states that this section would apply if:
the capital expenditure incurred on its provision for the purposes of the qualifying activity exceeds £12,000.
found here http://www.opsi.gov.uk/acts/acts2001/ukpga_20010002_en_6#pt2-ch8-pb3-l1g81
Reading this whole area a bit more closely it would seem that a 'car' purchased for less than £12,000 could not be allocated to a single asset pool and would fall into the main pool and would therefore be treated as if it were plant and machinery?? Is this correct?
This is how I've managed to navigate the document:
To work out if a m/c qualifies for First Year qualifying expenditure (and presumably following years):
Section 44 (1)(a) Yes it qualifies as it is purchased by a small company (in UK anyway)
(b) move to section 46
46 (2) General Exclusion 2, yes it's a car as defined by 81
Move to 53 and 54 description of types of pools
53(3) Applies to cars above the threshold (£12,000) m/c purchased for less than £12K therefore does not apply to m/c therefore the m/c will fall into the main pool and Chapter 8 does not apply ( see 74(2)(b) above), therefore it would not be treated in the same way as a company car over the threshold.
Presumably a company car bought new for less than £12000 would fall under the same rules as for a m/c?
They don't make it simple do they
74(2)(b) states that this section would apply if:
the capital expenditure incurred on its provision for the purposes of the qualifying activity exceeds £12,000.
found here http://www.opsi.gov.uk/acts/acts2001/ukpga_20010002_en_6#pt2-ch8-pb3-l1g81
Reading this whole area a bit more closely it would seem that a 'car' purchased for less than £12,000 could not be allocated to a single asset pool and would fall into the main pool and would therefore be treated as if it were plant and machinery?? Is this correct?
This is how I've managed to navigate the document:
To work out if a m/c qualifies for First Year qualifying expenditure (and presumably following years):
Section 44 (1)(a) Yes it qualifies as it is purchased by a small company (in UK anyway)
(b) move to section 46
46 (2) General Exclusion 2, yes it's a car as defined by 81
Move to 53 and 54 description of types of pools
53(3) Applies to cars above the threshold (£12,000) m/c purchased for less than £12K therefore does not apply to m/c therefore the m/c will fall into the main pool and Chapter 8 does not apply ( see 74(2)(b) above), therefore it would not be treated in the same way as a company car over the threshold.
Presumably a company car bought new for less than £12000 would fall under the same rules as for a m/c?
They don't make it simple do they
Yep - basically the rules stopped capital allowances of more than £3k pa being claimed on a car (and therefore a motorbike) costing more than £12k and stopped first year allowances of 40%/50% being claimed. i.e. the maximum write down that could be claimed in any year was the lower of £3,000 or 25% of the written down value.
That this applied to motorcycles was little known though it is there in the legislation in B&W.
The £12k limit would be irrelevant for most bikes (especially if VAT registered) but first year allowances have often been claimed.
It has now become much more relevant with the advent of Annual Investment Allowance (AIA) which, broadly, allows 100% relief in the year of purchase on the first £50k of capital expenditure.
It was thought that motorcycles qualified for this. They do not because the same Section 81 definition is used to exclude them as well as cars. So instead of 100% allowance in the year it's bought, only the new reduced 20% allowance is available. Of course, over the life of the bike in the business, it comes out in the wash apart from lost cashflow.
A potential nasty: next year cars with emissions over 160g will have their allowance reduced to 10% pa. Bikes have no published emission figures so, depending how the legislation is worded, may get caught with even lower allowance rates putting them at a severe disadvantage compared with many other cars.
That this applied to motorcycles was little known though it is there in the legislation in B&W.
The £12k limit would be irrelevant for most bikes (especially if VAT registered) but first year allowances have often been claimed.
It has now become much more relevant with the advent of Annual Investment Allowance (AIA) which, broadly, allows 100% relief in the year of purchase on the first £50k of capital expenditure.
It was thought that motorcycles qualified for this. They do not because the same Section 81 definition is used to exclude them as well as cars. So instead of 100% allowance in the year it's bought, only the new reduced 20% allowance is available. Of course, over the life of the bike in the business, it comes out in the wash apart from lost cashflow.
A potential nasty: next year cars with emissions over 160g will have their allowance reduced to 10% pa. Bikes have no published emission figures so, depending how the legislation is worded, may get caught with even lower allowance rates putting them at a severe disadvantage compared with many other cars.
Sounds about right, unless you are a small business that operates a "Flat Rate Vat" scheme.
In that case you can't claim the vat back - you just use the Inc Vat price as a company expense.
I may have to look into this idea of company-owned bike further..........
Al
Not quite correct, on the flat rate scheme you can claim the VAT back on single item purchases in excess of £2,000. You then keep them outside of the flat rate scheme and repay the VAT on the sale price once the item is disposed of.
Edit - oops, saw this earlier, seems it's already been answered
Not quite correct, on the flat rate scheme you can claim the VAT back on single item purchases in excess of £2,000. You then keep them outside of the flat rate scheme and repay the VAT on the sale price once the item is disposed of.
Edit - oops, saw this earlier, seems it's already been answered
No - thanks for the response........... I only just started looking at this thread again this morning.
I'm gonna have to trawl through it again to see if it makes sense financially.
Cheers!
Al
Interesting piece of legislation
If this could apply to electric motorbikes, we could be buying something like the Zero range of motorcycles and running them tax free. It seems daft that it won't apply though. In fact it seems daft that electric bicycles and non-electric bicycles aren't treated in the same way, as they are much less polluting than electric cars HMRC
http://www.hmrc.gov.uk/pbr2009/pbrn27.pdf
If this could apply to electric motorbikes, we could be buying something like the Zero range of motorcycles and running them tax free. It seems daft that it won't apply though. In fact it seems daft that electric bicycles and non-electric bicycles aren't treated in the same way, as they are much less polluting than electric cars HMRC
http://www.hmrc.gov.uk/pbr2009/pbrn27.pdf
Tim Dobby
Guest
Hi Clive
I have run bikes on the biz for several years.
It is far better to buy on the business and deduct VAT. Then depreciate
the bike over 4 years. Calculator not required!
You must demonstrate that the bike is being used mainly for business. Keep detailed mileage records as you have to with a company car. I believe that used on this basis there is no Benefit In Kind to pay. Make sure your insurers cover the business use envisaged; driving to see customers for example would not be covered under a normal bike policy.
If you sell/retrade the bike you will be responsible for VAT repayment on the trade in value. Our VAT inspector was fine about this.
Treatment of bikes by the Inland Revenue seems to be a grey area and many people seem to think the VAT can be lost on resale; I can assure you that based on an inspection we had 2 years ago, that is not the case.
Otherwise it seems to be a legitimate way to buy a motorcycle and I suspect that motorcycles are considered more like vans historically by the revenue (due to the courier industry) and hence regs have never been changed to reflect wider usage.
Good luck.
I have run bikes on the biz for several years.
It is far better to buy on the business and deduct VAT. Then depreciate
the bike over 4 years. Calculator not required!
You must demonstrate that the bike is being used mainly for business. Keep detailed mileage records as you have to with a company car. I believe that used on this basis there is no Benefit In Kind to pay. Make sure your insurers cover the business use envisaged; driving to see customers for example would not be covered under a normal bike policy.
If you sell/retrade the bike you will be responsible for VAT repayment on the trade in value. Our VAT inspector was fine about this.
Treatment of bikes by the Inland Revenue seems to be a grey area and many people seem to think the VAT can be lost on resale; I can assure you that based on an inspection we had 2 years ago, that is not the case.
Otherwise it seems to be a legitimate way to buy a motorcycle and I suspect that motorcycles are considered more like vans historically by the revenue (due to the courier industry) and hence regs have never been changed to reflect wider usage.
Good luck.
I remember a fairly recent thread about this, but can't locate it
The closest I can get is about Leasing and VAT
My basic calculation so far goes something like this...
Company pays £14,000 cash for bike
As a 40% tax payer and 10% for NI that has "saved me" £7,000
Tax code goes down by 20% of cost i.e. 2,800 which "costs me" £1,120 per year, so forgetting depreciation that's about 6 years of ownership
Looking at depreciation over say 3 years, my head explodes.
I presume Insurance is a company expense. What about gear, helmet etc?
Petrol - as most use will be personal, can you pay for all petrol personally and still claim the 25p per mile for business use?
I'll be contacting my accountant, but has anyone done the sums recently or hopefully got a spreadsheet?
+1. 4 years is the cut-off between VAT reclamation and personal tax. A bike is classed as plant and machinery and is 100% deductible against profit in the 1st year, (£50K capital allowance rising to £100K).
Hi Guys,
I have recently bought a bike and let my company purchase it. What do you guys do about fuel. Let the company purchase the fuel for when its on company business, or buy all the fuel personally then charge the company "x" amount per mile for business mileage or another options?
I have recently bought a bike and let my company purchase it. What do you guys do about fuel. Let the company purchase the fuel for when its on company business, or buy all the fuel personally then charge the company "x" amount per mile for business mileage or another options?
I don't think you can do that unless it is owned by you personally.
I put all my motorcycle fuel receipts through the company, keep records of business usage by mileage then declare the personal proportion on P11D.
You can pay some (or all) of the personal fuel usage to offset the P11D amount.
changes to tax laws are advantageous to bike buyers
I was sent an email from a local dealer with info regarding recent tax changes.
MOTORCYCLISTS MAKE MASSIVE SAVINGS AS CHANGE IN TAX LAW REVEALS BIKES USED FOR WORK ARE 100% TAX DEDUCTIBLE
With last week's Budget hitting the public in their pockets, Knotts have searched via the ‘Get On’ campaign to find out how bikers can make massive savings by taking advantage of a little known change in the law which could slash up to 40% off the cost of a new bike.
The Get On campaign has identified a change to the Finance Act which means self-employed riders buying a bike solely for business use can deduct 100% of its cost from their taxable profits by claiming it as an annual investment on their tax return.
The Get On campaign, which encourages new and lapsed bikers onto two wheels, has highlighted that the change in the law means you could save a staggering £2,728 on the cost of a new Honda CBF1000. Valued at £6,821, the change in the law will bring the cost of a new CBF1000 down to just £4,093 for those who pay 40% tax.
The recent change to the Finance Act shows the majority of those using their bikes for business will not only be able to take advantage of the time saving benefits enjoyed by life on two wheels, but they can also take advantage of a great tax break.
John Shaw of Chartered Accountants, Bentleys of Bolton commented: "Motorcycles are no longer treated for tax purposes like cars but as plant and equipment. This has a significant affect on the amount of tax relief you can claim when you buy a motorcycle for use in your business.Company cars are now limited to a 20% or 10% annual tax write-down unless they have a carbon footprint below 110g/km, in which case you may qualify for a 100% allowance. The same criteria no longer apply to motorcycles. Whatever their CO2 emission, 100% of the cost is potentially available as a tax write-off in the year of purchase.”
Sean Byrne, Tax Consultant for accounting firm Haslers, added: “The new rules apply only to motorcycles purchased after April 6, 2009. Total capital allowances must be within £50,000 in order to claim the tax write-off.”
Alistair Spence, who uses a bike to make a 62 mile regular business trip from St Albans to London, said: “I use a bike to make savings anyway and to also enjoy the freedom of not having to rely on public transport. This new law makes riding a motorcycle an even more viable financial solution.”
I was sent an email from a local dealer with info regarding recent tax changes.
MOTORCYCLISTS MAKE MASSIVE SAVINGS AS CHANGE IN TAX LAW REVEALS BIKES USED FOR WORK ARE 100% TAX DEDUCTIBLE
With last week's Budget hitting the public in their pockets, Knotts have searched via the ‘Get On’ campaign to find out how bikers can make massive savings by taking advantage of a little known change in the law which could slash up to 40% off the cost of a new bike.
The Get On campaign has identified a change to the Finance Act which means self-employed riders buying a bike solely for business use can deduct 100% of its cost from their taxable profits by claiming it as an annual investment on their tax return.
The Get On campaign, which encourages new and lapsed bikers onto two wheels, has highlighted that the change in the law means you could save a staggering £2,728 on the cost of a new Honda CBF1000. Valued at £6,821, the change in the law will bring the cost of a new CBF1000 down to just £4,093 for those who pay 40% tax.
The recent change to the Finance Act shows the majority of those using their bikes for business will not only be able to take advantage of the time saving benefits enjoyed by life on two wheels, but they can also take advantage of a great tax break.
John Shaw of Chartered Accountants, Bentleys of Bolton commented: "Motorcycles are no longer treated for tax purposes like cars but as plant and equipment. This has a significant affect on the amount of tax relief you can claim when you buy a motorcycle for use in your business.Company cars are now limited to a 20% or 10% annual tax write-down unless they have a carbon footprint below 110g/km, in which case you may qualify for a 100% allowance. The same criteria no longer apply to motorcycles. Whatever their CO2 emission, 100% of the cost is potentially available as a tax write-off in the year of purchase.”
Sean Byrne, Tax Consultant for accounting firm Haslers, added: “The new rules apply only to motorcycles purchased after April 6, 2009. Total capital allowances must be within £50,000 in order to claim the tax write-off.”
Alistair Spence, who uses a bike to make a 62 mile regular business trip from St Albans to London, said: “I use a bike to make savings anyway and to also enjoy the freedom of not having to rely on public transport. This new law makes riding a motorcycle an even more viable financial solution.”
Take care. That article is true up to a point but there is more to it (note the "for 100% business use" caveat for instance). Still a useful break though.
On the other side of the coin, the latest budget is changing the VAT reclaim rules where there is an element of private use. Details unclear at the moment - may end up as just being a timing difference but I suspect those on the Flat Rate Scheme will lose out.
On the other side of the coin, the latest budget is changing the VAT reclaim rules where there is an element of private use. Details unclear at the moment - may end up as just being a timing difference but I suspect those on the Flat Rate Scheme will lose out.
Bringing this up to speed...
Right,
So after trawling through endless bits and bobs of information, this is how I see this working.....Please point me in the right direction if I'm not heading the right way.
Ltd Company, and salary within 20% tax bracket.
30% personal use / 70% Business use.
Company buys a bike for say £11,999 inc Vat.
VAT - Company can reclaim Vat to the % equivalent to Business use. Therefore - 70% of £2000 = £1400
Benefit in Kind (BIK) has to be paid on the personal use of the bike, and associated costs - insurance, tax, servicing, safety gear etc which are all claimable through the company.
You pay a set figure of 20% of the list price for the bike per annum plus associated costs (say £1000)
12000 + 1000 = 13000 x 20% = £2600
Of this 2600 you only pay BIK equivalent to the your tax bracket (20%) so... 2600 x 20% = £520
If only 30% of the vehicles use is private, then BIK is only £520 x 30% = £156
The bike would have to be shown as an asset on the company books. Depreciation of the bike (this is where I lose the plot a little) 20% per year over 5 years I believe.
So - Yr1 £11,999 x 20% = 2400
Yr2 £9,600 x 18% = 1728
Yr3 £7,872 x 18% = 1416.96
Yr4 £6,455.04 x 18% = 1161.90
Yr5 £5,293.14 x 18% = 952.77
OR -
There is the 100% Annual Investment Allowance - which I don't get.
It's a Ltd company in its first year of trading - does the AIA (above) mean that the asset can be written off in the first year, as there is a £50,000 allowance?
Finally, Fuel - I don't see how this works. I would pay for the 30% personal use fuel, and not claim for this. The 70% business use - do I just pay for the fuel through the company for this usage? Can anything be claimed back for this?
Would there be any NI contributions against this?
Vat would be charged should when the bike is sold.
Any help would be much appreciated.
Thanks,
Chris
Right,
So after trawling through endless bits and bobs of information, this is how I see this working.....Please point me in the right direction if I'm not heading the right way.
Ltd Company, and salary within 20% tax bracket.
30% personal use / 70% Business use.
Company buys a bike for say £11,999 inc Vat.
VAT - Company can reclaim Vat to the % equivalent to Business use. Therefore - 70% of £2000 = £1400
Benefit in Kind (BIK) has to be paid on the personal use of the bike, and associated costs - insurance, tax, servicing, safety gear etc which are all claimable through the company.
You pay a set figure of 20% of the list price for the bike per annum plus associated costs (say £1000)
12000 + 1000 = 13000 x 20% = £2600
Of this 2600 you only pay BIK equivalent to the your tax bracket (20%) so... 2600 x 20% = £520
If only 30% of the vehicles use is private, then BIK is only £520 x 30% = £156
The bike would have to be shown as an asset on the company books. Depreciation of the bike (this is where I lose the plot a little) 20% per year over 5 years I believe.
So - Yr1 £11,999 x 20% = 2400
Yr2 £9,600 x 18% = 1728
Yr3 £7,872 x 18% = 1416.96
Yr4 £6,455.04 x 18% = 1161.90
Yr5 £5,293.14 x 18% = 952.77
OR -
There is the 100% Annual Investment Allowance - which I don't get.
It's a Ltd company in its first year of trading - does the AIA (above) mean that the asset can be written off in the first year, as there is a £50,000 allowance?
Finally, Fuel - I don't see how this works. I would pay for the 30% personal use fuel, and not claim for this. The 70% business use - do I just pay for the fuel through the company for this usage? Can anything be claimed back for this?
Would there be any NI contributions against this?
Vat would be charged should when the bike is sold.
Any help would be much appreciated.
Thanks,
Chris
Not sure about the Benefit In Kind as it doesn't apply to my circumstances.
But, I was told by the VAT Office Helpline quite some time back that I could reclaim 100% of the VAT on the purchase, and a subsequent VAT inspection didn't raise any issues with this, evn though at that time Business / Private use was 50/50.
Regards depreciation, this changed last year and a motorcycle is no longer classified as a vehicle but as plant and equipment and so falls within the £50,000 annual allowance that qualifies for 100% write down in year 1.
But, I was told by the VAT Office Helpline quite some time back that I could reclaim 100% of the VAT on the purchase, and a subsequent VAT inspection didn't raise any issues with this, evn though at that time Business / Private use was 50/50.
Regards depreciation, this changed last year and a motorcycle is no longer classified as a vehicle but as plant and equipment and so falls within the £50,000 annual allowance that qualifies for 100% write down in year 1.
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