Considered using the Cycle to Work Scheme?

19th October 2022

If you were interested in offering your employees the Cycle to Work Scheme, there are three main methods you could use:

 

  1. Salary Sacrifice
  2. Loan
  3. Pooled cycles

 

Method 1: Salary Sacrifice

Under this method, your employee would be agreeing to sacrificing part of their salary before tax and you would provide the hire of a bike.

 

Certain conditions must be met, such as ‘at least 50% of the cycle’s use must be for ‘qualifying journeys’, i.e. commuting to work’. The full list of conditions can be found on the following link:

Cycle to Work Scheme guidance for employers (publishing.service.gov.uk)

 

The main points to consider with a salary sacrifice arrangement are:

  • The employee’s gross salary would be reduced and this could affect their entitlement to benefits such as Maternity Allowance, Statutory Pay and State Pension.
  • If the employee was looking to take out a mortgage, they would potentially borrow less, as their gross salary would be considered the amount after salary sacrifice.
  • There is no limit to the value of the cycle for tax purposes, but you must make sure your employee is still being paid at least National Minimum Wage after the salary sacrifice deduction.
  • From an employer’s perspective, you would be making a cost saving, as you don’t have to pay employer’s NI on the amount of gross pay sacrificed.

 

There are Corporation Tax and VAT points to consider too. Your Whiting’s advisor can go into more detail if you were interested.

 

Method 2: Loan

You could offer your employee a loan to purchase the bike, and they could repay this from their net wages. There will be tax and national insurance implications if the loan is >£10,000 and you do not charge interest at HMRC’s official rate, as it would be considered a benefit in kind and would need reporting on a P11D.

 

Method 3: Pooled Cycles

 You could bare the full cost of having a pooled cycle, instead of recovering the costs from the employee. This would be treated as an asset for the employer.

 

A point to consider is that the scheme may be subject to other regulations. You can set up your own Cycle to Work Scheme or alternatively you could outsource the scheme to a specialist Cycle to Work Scheme provider who would ensure the scheme is fully compliant, provide advice and administer the scheme.

 

If you are interested in offering this to your employees, please speak to your Whitings contact who can provide further advice.

Disclaimer - All information in this post was correct at time of writing.
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