Can my company purchase a bicycle for an employee and/or a director?

Published Wednesday, 12th August 2020

Yes, you can purchase a bike through your limited company for the use of an employee or Director. The costs of a bike and associated safety and security equipment will be tax deductible and any VAT can be reclaimed.

The bike can be used for non-work purposes but to qualify as a tax-free benefit, the following conditions will need to be met: 

  • An employee should use the bicycle mainly for commuting to and, if relevant, between workplaces. Broadly this means at least 50% business use. 
  • Ownership of the bike must remain with the company through the loan period. 

If the bike is transferred to personal ownership, a taxable benefit charge will arise based on the market value of the bike at the date of transfer. Assuming 100% relief was obtained during the year of purchase, the company will also need to pay corporation tax at the lower of cost and disposal value. 

If you have multiple employees, it may be more appropriate to use the Cycle to work scheme. Under the scheme, your company would purchase the bike and equipment with employees paying it off over a set period in monthly instalments. This is technically a ‘hire period’ with the employee having the option to purchase the bike and equipment for ‘fair market value’ at the end of the term. The monthly repayments of the loan are made by the employee via salary sacrifice for the agreed period until the loan is fulfilled. The tax savings achieved on a salary sacrifice arrangement make this an attractive option for employees to acquire a bike. 

If you require any further information or if you would like to discuss potentially purchasing a bike through your limited company further, please get in contact and we’d be more than happy to help. 

COPYRIGHT © 2020 CALDWELL PENN LIMITED   |   Company Reg Number: 03872209   |   ICAEW - Institute of Chartered Accountants in England and Wales: C005061064

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