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Motor Bikes and Benefits in Kind

By Taxwise

taxwiselogo

Q. My client is a limited company. The sole director shareholder travels in a busy city centre. In order to save on travel costs the company is considering purchasing a motorbike. He is concerned that there will be a significant benefit in kind charge. Can you please explain the charge for a motorbike?

A. For the purposes of a benefit in kind, a motorbike is treated as a provision of an asset and not as a motor vehicle. This type of provision is calculated as follows:

  • Take the greater of 1) the assets annual value (this is 20% of the Market value of the asset when it was first provided to the employee) or 2) the rental/hire charge that has been paid for the asset.
  • Once you have the above figure, add to it costs incurred by the employer that relate to the running costs of the asset (i.e. insurance, maintenance/servicing costs and provision of safety equipment).

The figure that you arrive at will then be the taxable benefit in kind which is fully chargeable on the employee in the first instance and then reduced for the business usage.  It is worth taking note that as with all benefits in kind, there will be a NIC Charge on the Employer. This will be class 1A which will be 13.8% of the cash equivalent of the benefit. There will be no NIC charge to your client. 

Published October 2015