As a business owner, you have the possibility to buy a vehicle through your company. That can come in handy, especially if you need the vehicle for your daily business. Before you purchase a vehicle, do make sure to inform yourself thoroughly about the available options, about tax liabilities and to weigh up the pros and cons of different types of vehicles. This is what you need to know about purchasing a vehicle for your business.
Types of Vehicles
As a business owner, you can buy a vehicle through your company. If your day-to-day business doesn´t require a certain type of fleet, you have the choice between different types of vehicles. Most businesses choose cars for company vehicles, but there are alternatives.
Does a Company Motorcycle Make Sense?
More and more business owners decide to forego a company car and to invest in a company motorcycle instead. That’s because motorbikes have specific advantages compared to cars. Motorcycles are usually a lot cheaper than cars to begin with. That means they´re easier to purchase for smaller companies that don´t have a high annual investment allowance yet.
If a motorcycle is bought by a company, the invoice must prove that and have the company name on it. After a purchase, the asset costs lead to 100% deduction against profits while the VAT is completely recovered. Because of that, company vehicles are attractive in terms of taxes. You plan on leasing the motorcycle instead of purchasing it? Leasing is really common among business customers, because the rates are tax-deductible.
Motorcycles are the perfect vehicles for companies that are situated in places with a lot of traffic. Since they´re smaller than cars, they make it easier to find a good parking spot and also to make your way through traffic. That saves your employees a lot of time, which – as we all know – is money. As employees of different sizes can get on the motorbike without having to adjust the seat, the mirror and other things, it´s possibly the type of vehicle that offers most flexibility.
Of course, motorcycles have downsides, too. If the motorbike is meant to be used by different employees as a so-called pool car, you need to make sure that every single one of them is equipped with fitting safety gear. Motorgear from ChromeBurner comes with high quality and performance at a fair price. Of course, the costs for helmets and the like can be used for tax-deduction, too.
If your employees work in teams and go on appointments together on a regular basis, motorcycles simply don´t offer enough seats. That means, you either need to get more motorcycles or switch to a car.
Does a Company Car Make Sense?
Keep in mind that cars per se are not tax-deductible – depending on how the vehicle is financed. If you need a loan for your investment, you can only deduct the interest rates, not the repayment. Follow this link in order to find out more about how you can save your small business taxes. That way, your investments are really worth it.
There is an opportunity, though, to reduce your taxable income through Capital Allowance. If you plan on taking full advantage of it, make sure to purchase an electric car for your company, as that will be 100% tax-relevant. When leased, the leasing rates can also be invoked.
Other Types of Vehicles
As a company owner you should consider different aspects before purchasing a vehicle. Answer yourself the following questions:
- Which purpose will the vehicle serve: Will you use it to transport goods or will it only be used by employees, who need to get from one place to another?
- Where will the vehicle mainly be used?
- What are the distances that are meant to be overcome? Motorcycles are great for short distances, but not convenient for long ones.
- Will there be frequent driver changes?
- What is the happy medium between your maximum budget and the maximum tax-advantage?