Cycle To Work Scheme
26 Nov 2021
As businesses return to the office in the wake of the pandemic, many are doing so with a renewed focus on the health and wellbeing of their employees. One such initiative that is available is the Cycle to Work Scheme.
The cycle scheme is something that is well established and the Government actively encourage companies to offer it to their staff. Not only that, it is now a better perk than ever, with no cap on the spend and the ability to use the scheme for cycling accessories as well as bikes.
How does it work?
Employees choose a bike to hire from the company over a period of time, for example 12 months. The hire fee is then deducted from their gross salary each month.
By deducting from the employee's gross salary rather than the net amount, they receive tax and national insurance savings which can equate to a saving of between 25% and 39%. At the end of the salary sacrifice period, employees can purchase the bike from the company for a low fee, determined by the market value of the bike.
The tax and NI saving, combined with the 12-month salary sacrifice option, has often been what encourages many to purchase bikes that previously they would have deemed too much of a luxury to buy for themselves.
Other than financial, what other benefits are there?
- Reduced staff sickness – recent research suggests that regular cycling halves the number of sick days. The average worker misses 4.5 days due to illness per year, whereas the average cyclist misses just 2.4 days a year. In addition, increased physical activity will also support employees' mental health which in turn has been found to reduce sickness and absenteeism in the workplace.
- Solves car parking issues – office politics regarding car parking can often be a big issue. More employees choosing to cycle allows the company to make the most of limited spaces available, with no parking costs for staff who choose to cycle.
- Improved fitness and wellbeing – increasing physical activity levels can make staff more motivated and productive in the workplace. With employees arriving with higher brain function and a positive mental attitude, they are more likely to be ready to crack on (maybe after a quick freshen up!), without needing to resort to a cup of coffee to kick start the working day.
- Reduced congestion – how often do you get stuck in traffic on your daily commute? With many cities now introducing cycle lanes onto the busy streets, you may find it quicker to reach your destination by bike rather than by car.
- Peace of mind – as we emerge from the pandemic, many people remain concerned about exposure to Covid-19 and other illnesses on public transport. So, as well as offering benefits to mental and physical health, cycling is the ideal way to avoid catching a virus on the commute to work.
When the hire period ends (usually after either 12 or 18 months) the employee gets a few options, they can either:
- return the bike
- pay an ownership fee based on the value of the bike
- sign an Extended Use Agreement up to another 36 months and then pay an ownership fee.
What else needs to be considered?
There are, however, some other factors that must be considered before progressing with the scheme. These include:
- The employer must be registered with HMRC under the Cycle to Work scheme.
- Not all bike manufacturers offer bikes through the Cycle to Work scheme so it is best to check first before purchase.
- The limit of a package is usually £1,000 but authorisation can be sought from the OFT to exceed this amount.
- Ownership of the bike and the equipment will sit with the employer throughout the term of the contract until the final payment is made.
- The main use of the bike should be for qualifying journeys i.e. between home and a workplace.
Next Steps
HMRC have published full guidance regarding the scheme, including further details on equipment, taxation and other factors. To review, visit their website here: https://bit.ly/30ZDXT7
To understand the tax implications further, our dedicated team can assist with helping you to plan and execute the scheme for your employees.
Call a member of our tax team on 01753 888211 or email info@nhllp.com, we would be happy to assist.