THE introduction of congestion charging in London and plans for road tolls throughout the UK is playing into the hands of fleet operators who allow staff to ride motorcycles.

In London, motorcycles currently do not have to pay the congestion charge and Transport for London (TfL) has revealed that motorcycling inside the charging zone has increased by 20% since it was introduced.

It was also accompanied by a 15% decrease in motorcycle casualties, although there is no official explanation for this.

Motorcycles often pay lower levies when it comes to road tolls and to add a further incentive, there is a clear benefit-in-kind tax windfall available by moving from a car to a motorbike.

Employees who benefit from the private use of a motorbike will be taxed on 20% of the cost of the machine to the employer.

So unlike a company car, benefit-in-kind tax on motorbikes takes into account any discounts obtained.

The tax bill is reduced if there is any business use, by a ratio of business use to private use.

Trevor Cutts, managing director at Elite Incident Management, which provides a fleet motorcycle repair network, has compared the pros and cons of running motorcycle fleets.

He said: ‘Benefit-in-kind tax rules for employees who opt for a motorcycle are completely different to those for company cars and are open to the interpretation of local tax inspectors.’

Under Inland Revenue rules, employees can have their annual 20% tax charge reduced by a fraction if there is business use of the motorbike. This is represented by the ratio of business use to total use (see Method 1).

Alternatively, employees pay the full 20% tax charge. Then they reduce that tax bill by claiming up to 24p per mile free of tax and National Insurance contributions under Inland Revenue approved mileage rate allowances for any business mileage (see Method 2).

If the employer pays less than that ppm figure, the rider can claim tax relief on the difference. Before deciding on which tax system to opt for, fleets need to fully calculate the financial implications.

Alison Chapman, head of tax in the automotive sector group of Deloitte, said: ‘Claims for a reduction in tax based on business use must be supported by evidence such as journey logs and fuel receipts.

‘The legislation is unclear and open to interpretation by local tax inspectors. Therefore both options are open to employees.’

In the majority of cases, bikers would be better off opting to pay the full tax charge and claim business mileage.

BIK tax costs of running a motorcycle costing £6,000

Example 1
		Method 1		Method 2
20% tax charge		£1,200		£1,200
40% business use		£720
Tax paid 22%/40%		£158.40/£288		£264/£480
6,000 miles pa (40% business @ 24p a mile)		£576

Example 2
		Method 1		Method 2
20% tax charge		£1,200		£1,200
10% business use		£1,080
Tax paid 22%/40%		£237.60/£432		£264/£480
2,500 miles pa (10% business @ 24p a mile)		£60

In both these examples, it would be best to claim mileage allowance (Method 2)

Source: Elite Incident Management