The Cycle to Work scheme is a UK Government tax exemption initiative introduced in the Finance Act 1999 to promote healthier journeys to work and to reduce environmental pollution. It allows employers to loan bicycles and cyclists’ safety equipment to employees as a tax-free benefit provided that at least 50% of the bicycle’s use is for business purposes (which includes home to work cycling).
Although it is not necessary, a salary sacrifice arrangement may be put in place, where the employee agrees to give up part of their pre-tax salary in exchange for the hire of a bicycle to be used as detailed above. Although the bicycle remains the property of the employer, the salary sacrifice arrangement can save both employers and employees National Insurance as well as employees PAYE.
If, after the salary sacrifice arrangement has finished, the employee wishes to purchase the bicycle from the employer, HMRC has a set range of percentages based on the age and original cost of the bicycle.
A booklet entitled Cycle to Work Scheme – Guidance for Employers may be obtained from Gov.UK by using the following link which will provide you with further information:-
https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance
If an employer and employee wish to take advantage of the cycle to work scheme via a salary sacrifice arrangement, we suggest that they use one of the many cycle to work scheme providers to ensure the correct paperwork including consumer hire arrangement is correctly recorded.
If an employer does not require a salary sacrifice arrangement to be put into place, they may simply purchase a bicycle for the employee to use.
Please do not hesitate to contact us if you would like to discuss this further.