Looking to reduce your carbon footprint, get fit or just avoid over-busy public transport?, then buying a bike through your Limited Company, might be the solution for you!
The cycle to work scheme was introduced in 1999, to encourage employers to lend bikes to employees, with no tax implications, or to allow employees to buy bikes in a tax-efficient manner.
However, Directors of companies (including where the Director is the only employee) can benefit from this scheme too!
How to buy your bike
Your company should buy the bike in its name. You will need a VAT invoice from the supplier in your Company's name. With this invoice, you'll be able to reclaim the VAT and reduce your corporation tax bill too.
For example, buying a £1,200 bike, you'd be able to claim back £200 in VAT and another £190 in Corporation Tax.
There is now no upper cap on the value of the bike you can buy
The company can also buy your helmet and any protective clothing you need, and these items are also deductible for Corporation Tax
HMRC state that to benefit from the tax savings, the bike should be used predominately for work. That means that at least 50% of the mileage on the bike must be work-related.
The definition of work-related for bike purposes is wider than HMRC's normal travel policy though, and commuting to and from work also counts as work journeys. So, even if you never leave the office after you've arrived, you could still qualify.
HMRC does not require you to keep a mileage log, and there is no requirement for employers to monitor employees' usage.
If the bike is used predominantly for leisure use, then Benefit in Kind charges will apply
Can I transfer the bike to myself?
If you buy the bike from the company at a later date, then the company will have to pay Corporation Tax on the value the bike was sold for. This should be sold at a commercial rate (so you can't buy a £1,000 bike and sell it to yourself for £1, 3 months later)
HMRC do have published guidance on the minimum values they expect for bikes when sold on
can employees benefit from this too?
Yes, but generally this is set up as a salary sacrifice scheme, so the employee still gets the tax breaks (as does the company), but the ownership is passed to the employee at the end of the scheme