In previous blogs, we have spoken extensively about the pros, cons and how tos of purchasing a vehicle through your limited company, but rarely have we touched upon whether purchasing a bike is a good idea and if it is, how to go about it. However, this is a question we are being asked more and more by our clients for a variety of reasons ranging from trying to reduce their carbon footprint, to the positive health benefits of cycling to work instead of driving.

The rules according to HMRC

HMRC states that if an employer lends or hires a bicycle or safety equipment to employees or directors of a company, the benefit will be exempt from employment income if the following conditions are met:

• The bike and safety equipment are generally available to all employees should they wish to take up the offer.
• The bike and equipment is predominantly used for work – in this case, commuting to and from work counts as business travel.
• The bike and equipment is loaned and not given – the company must retain ownership of the bike.

Simply put, as long as the above rules are followed, borrowing a bike through your company will not result in any taxable benefit, and you will not require a P11D.

As an added bonus with bikes, unlike cars, employees and directors are also not expected to keep detailed records of the time spent travelling, or the miles which they have travelled to prove that the bike is being used for business purposes. Unless there is clear evidence to the contrary, the ‘main use’ test will be satisfied.

It is also worth noting that the taxable benefit exemption also covers the provision of a voucher for hiring bikes and equipment.

Purchasing a bike

In short, purchasing a bike will reduce your corporation tax liability. This is because the purchase of a bike is seen as capital expenditure and so will qualify for the Annual Investment Allowance, which means the entire cost will qualify for corporation tax relief in the year of purchase. The cost of any safety equipment purchased will also be tax deductible.

The bike and any equipment should be bought in the company name and there is no upper limit on the value of the bike that can be bought.

If you are interested in finding out more about purchasing a bike through your company, or would like some more advice on doing so, please do get in touch.