Motorcycle as company car alternative?
Are you one of the many commuters who are regularly caught in gridlock and who tend to look askance at the odd motorcyclist who seemingly effortlessly weave in and out of traffic? It may seem an attractive alternative, especially during the spring and summer months … but is it really an alternative for the company car? Let’s see.
The points of departure are the same: both depreciation and the costs of fuel, maintenance, taxes and insurance may be taken to the operating profit for motorcars and motorcycles alike whereas the turnover (or value-added) tax components of the purchase price and the fuel and maintenance costs are deductible as input tax and a turnover tax correction is required to be made at year-end to compensate for the employee’s private use of the motor vehicle in question.
Anyone who has a company car at his or her disposal has to deal with a statutorily defined (standard) addition to their income to reflect their private use of the car, at a rate which for most 2017-registered cars amounts to 22% of the list price. The only way of avoiding such addition being made is by submitting proof bearing out that the private use of the car during the (tax) year in question has amounted to less than 500 kilometres.
No standard addition applies to company motorcycles. The business owner or employee who has a company motorcycle at his or her disposal will have no choice but to add the vehicle’s actual value to their income, with the aggregate costs and charges being proportionately allocated between the business-related and private mileages. This can work out more favourably for the motorcyclist, although this is not always the case: as the motorcyclist has the advantage of his or her vehicle from the first privately travelled kilometre onwards, curbing the use for private purposes to less than 500 kilometres annually – by contrast to the company car scenario – will not render the various vehicle-related costs and charges chargeable to the business in their entirety.
The employee’s use of his or her company motorcycle for private trips constitutes “wages in kind”, with the employer having the option of classifying it as a “final levy component” in order to take it to the free margin in the context of the Work Related Expenses Scheme, with the proviso that if the entire free margin had already been used up, this would make the employer liable for an 80% final levy payment. The alternative would be to charge the wages in kind in the customary manner, at the level of the employee.
The costs pertaining to the private use of a company motor vehicle constitute a withdrawal from the business’s assets seen from the business owner’s perspective, which withdrawal calls for an upward adjustment being made to the profit. If we assume that the motorcycle-related charges average out at 60 euro cents per kilometre and the motorcyclist in question travels a total of 5,000 kilometres in private trips, the relevant withdrawal would amount to (5,000 times 60 equals 300,000 euro cents is) 3,000 euros, which based on a 52% income tax rate would correspond with a cost of 1,560 euros.
N.B. There is no statutory obligation to keep a mileage log for company motorcycles.
The company motorcycle by contrast to the company car is not expressly excluded from the small-scale investment allowance scheme. Up to 28% of the purchase price of the motorcycle may be deducted from the profit depending on the aggregate investment allowance the business enjoys for the entire year. Businesses that invest in electric (motor) scooters or motorcycles moreover have access to the environmental investment allowance and the random depreciation of environmental investments.
In addition to the actual motorcycle-related costs, expenses incurred in relation to accessories such as clothing and helmets may also be accounted for as a business expense.
Tax-wise it cannot be denied that the company motorcycle is an attractive alternative to the company car. This should not, however, be taken as a guarantee that anyone who swaps his or her company car for a company motorcycle will be the better person for it, as there are additional aspects to be taken into consideration such as safety, the risk of the employer being held liable for injury or loss sustained by the employee and loss of time due to the employee having to change in and out of his or her motor gear. All in all the company motorcycle can be said to represent an attractive alternative for the business owner who already was a keen motorcyclist whereas for others it may not necessarily work out quite as well.