The Cycle to Work Scheme
The number of people taking to cycling each year is growing with over two million people taking to their bikes once a week according to British Cycling. In the large cities of the UK, it is seen to be one of the most efficient ways of getting from A to B. According to government statistics, 30% of people get to work on two wheels. There was even a Cycle to Work Day on the 14th September 2016. (I missed that one). It happened in 2013, 2014 and 2015 – but I missed those as well.
Employers can put in place a cycle to work scheme, so employees listen up. Even a director only company can have one. The scheme is a UK government tax exemption initiative to help promote a healthier lifestyle as well as reduce environmental pollution. Employers can loan bicycles and cyclists safety equipment as a tax-free benefit provided the value is less than £1000*.
The equipment that can be included in the scheme:
- A bike (handy) but the amazing thing is that it also includes those new ones that have a battery to assist peddling (I do like the sound of one of those);
- Cycle helmets that conform to European standard EN1078 (don’t know what happens to these standards after Brittan leaves the EU but that is another post);
- Bells and horns;
- Luggage carriers and the straps to allow bags to be safely carried;
- Child safety seats
- Mirrors & mudguards so cyclist can see safely;
- Locks & security chains;
- Pumps & repair kits;
- Protective clothing with those reflective strips build in;
- Cycle clips & dress guards.
With all that kit, you probably need to have a car to put it in!
How does it work?
The two methods are via a loan scheme, or via a salary sacrifice arrangement and the employer reduces the salary of the employee. There must be a salary sacrifice letter in the employee’s file to show this has been agreed. It needed to be noted that the sacrifice cannot take the employee below the national living wage or the minimum wage dependant on the age of the employee.
The employees enter into a hire agreement with the employer for the bikes, so the employee must be over 18 as they need to sign a legal agreement. The scheme must be available for all employees, but there can be different levels of bike to different levels of staff. I can picture the old Chopper bike versus a Felt Z6 bike.
The hire agreement or salary sacrifice letters must be in place before the commencement of the scheme for the employee. We can provide a template for the salary sacrifice letter.
Ownership of the Equipment
It is important to note that the title of the bike belongs to the company and does not pass to the employee. The bike should mainly be used for travelling back & forth to work and work related journeys need to account for at least 50% of its usage. There is no requirement to keep mileage logs, but the advice would be to keep one to prove the 50% use. Many people take the train city to city and then use the bike to get from the station to the office. You just need to be careful about which train journeys the bikes cannot be taken on.
The joyful news for tax is that there is no benefit in kind payable by the employee so it will not appear on the P11D for the employee, and therefore no payment of national insurance on the cost.
*The value is to do with the consumer credit act and hire agreements.