Cycle to Work (May 2010)

A growing number of organisations have recognised the wide ranging benefits to both the organisation and its employees of the Cycle to Work scheme - in fact with over 10,000 UK employers so far signed up to the scheme, this �green� initiative has been widely applauded.

To promote healthier journeys to work and to reduce environmental pollution, the 1999 Finance Act introduced an annual tax exemption, which allows employers to loan cycles and cyclists� safety equipment to employees as a tax-free benefit. This exemption was one of a series of measures introduced under the Government�s Green Transport Plan.

Employers of all sizes across the public, private and voluntary sectors can implement a tax exempt loan scheme for their employees. To qualify for the tax exemption, the cycles and cyclists' safety equipment loaned by the employer under the scheme must be available to employees generally with no groups of employees excluded, so participation can be as broad as possible. But no matter how small your organisation your employees can take advantage of the benefits under this scheme.

The Basic Rules

There is no minimum or maximum company size necessary to sign up to the scheme. Eligible employees must be paying PAYE, earn more than the national minimum wage after salary sacrifice, and have a contract that does not end during the hire period. (Employees who earn close to the national minimum wage following salary sacrifice may wish to discuss with their employer the option of loan or pool bikes.) There is no credit check for employees wishing to participate. Personnel under the age of 18 can join the scheme if their guardian signs a guarantor agreement.

Taking advantage of the scheme can result in typical savings for employees of between 40% and 50% of the retail price of bicycles. The actual amount depends on the employee�s personal tax band and the way the employer runs their scheme. Higher rate taxpayers will save more, employees whose company cannot reclaim VAT (the NHS, for example) will save less.

To help employees take advantage of this tax-free benefit, an employer can simply buy a cycle and cyclists� safety equipment and loan it to an employee for qualifying journeys to work. As a business expense, the cost of providing this equipment is reduced by claiming the VAT incurred under the normal rules, and by making use of any capital allowances available. Under this arrangement employees� normal salary arrangements are not affected, and it is sometimes referred to as a �salary plus� arrangement.

Salary Sacrifice � Smart Bikes

It may be, however, that the employer wants to recover the cost of providing the cycle and safety equipment loaned to the employee. Usually this would be done through a salary sacrifice arrangement. This method of recovery is extremely cost effective and an efficient way for the employee to fund the arrangement.

A Cycle to Work scheme that takes advantage of the 1999 tax exemption does not require the prior approval of HMRC. Similarly, prior approval by HMRC is not required where salary sacrifice arrangements are used to offset cost. However, once a Cycle to Work scheme is in place it would be worthwhile an employer confirming with the HMRC that tax and NICs do not have to be accounted for on the amount sacrificed.

Take A Stand Scheme

This is a Transport for London initiative that aims to improve parking for cycling commuters. Under the initiative, companies are encouraged to draw up travel plans to increase cycling, walking and use of public transport in return for help with provision of cycle stands and changing facilities.

TfL can provide free cycle stands for up to 40 bicycles, which can either be bolted down or sunk into the ground. TfL also offer up to £1,000 match funding for facilities including showers, lockers and drying facilities as well as trade price Raleigh bicycles for pool cycle facilities.

In order to qualify for the scheme, employers must draw up a workplace travel plan, which sets out how they will encourage their staff to use sustainable transport such as cycling, walking and public transport.

For an initial discussion to establish how the Bikes To Work and Take A Stand schemes could be attractive to your employees, please contact us for a free consultation.

Demitrius Nurse
Partner - Employee Benefits
Email: employeebenefits@cartlidgemorland.co.uk
Call: 020 7709 5560

Cartlidge Morland is an independent employee benefits consultancy. We provide benefit services to a wide range of partnerships, family companies, PLCs, charities and governmental organisations. We also provide financial advice to private clients, investment management and mortgage broking services

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