Cycle to work schemes

There are special rules involving bicycles usually referred to as ‘Cycle to Work’ arrangements. The Cycle to Work scheme was introduced almost 20 years ago to help promote the use of healthy ways to commute to work using an environmentally friendly mode of transport. Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme with the proviso that no employees or groups of employees are excluded. Note that the Cycle to Work scheme cannot be used if in doing so this would reduce an employee’s gross pay below the National Minimum Wage.

The scheme allows employers to provide (technically loan) bicycles and cyclists’ safety equipment (worth up to £1,000) to employees as a tax-free benefit. Where the scheme conditions are satisfied employees can benefit from a tax and National Insurance Contribution (NIC) reduction of between 32% and 42% through a salary sacrifice scheme. In addition, there is no employer liability to NICs.

What happens at the end of the loan period?

The Cycle to Work benefits only relate to the loan period, however, it is commonplace for an employer or a third party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Posted by Cassey Nixon on

1st February 2019

Categories

  • Business record keeping for the self-employed

    If you are self-employed as a sole trader or as a partner in a business partnership, then you must keep suitable business records as well as separate personal records of your income. For tax purposes, the business records must be held for at least 5 years after the 31 January submission deadline for the relevant […]

  • Making Tax Digital for VAT

    The deadline for businesses with a turnover above the VAT threshold to keep digital records for VAT purposes using Making Tax Digital (MTD), is here. For VAT returns periods starting on or after 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will have to: keep their records digitally (for VAT purposes […]