In the 20 years since the Cycle to Work scheme was introduced, the scheme has involved over 40,000 employers and helped more than 1.6 million commuters pedal to work.
Yet a recent IFF research report does not list Cycle to Work in the top five employee benefits, although workplace car parking does feature.
Only 19 per cent reported they were offered some form of cycle scheme by their employer and then only 2 per cent actually took it up. However, when participants were asked about the perceived value of benefits, cycles came in at number four.
Some schemes just involve a loan from the employer to purchase the bike. Employers can loan employees up to £10,000 in the tax year, with no benefit in kind reporting obligations. This also avoids the need for employers to check that the cycle is used for ordinary commuting in full or in part.
For those using salary sacrifice, HMRC recently issued updated guidance on cycle to work schemes, covering the tax and legal position. Under this arrangement, typically there will be a hire agreement, with the employee giving up part of their pre-tax salary in exchange for the benefit of a cycle from their employer.
Since a portion of the salary is foregone, the employee pays less tax and National Insurance Contributions (NICs), and the employer is able to save on employer NICs at 13.8 per cent and Apprenticeship Levy at 0.5 per cent (where applicable) on the amount sacrificed. However, the following conditions must also be met:
- an employee must not, at any point during the hire period, own the cycle;
- at least 50 per cent of the cycle’s use must be for ‘qualifying journeys’, ie commuting to work purposes; and
- the offer of the use of hired cycles must be made available across the whole workforce, with no groups of employees being excluded. This does not necessarily have to be through a salary sacrifice arrangement in each case.
For tax and National Insurance purposes there is no limit on the value of the cycle and safety equipment you can provide to an employee.
The guidance confirms that you can hire two cycles to one employee if, for example, a cycle is used at either end of a train journey between home and place of work, where they meet the above, also that an Electrically Assisted Pedal Cycle (EAPC) can be included. This is subject to the £1,000 limit if the employer is relying on the FSMA Order exemption or where the total value of goods hired exceeds £1,000, requisite FCA authorisation has been obtained.
So perhaps in this London Climate Action Week, when looking at solutions to cut carbon emissions we will see more employers introducing schemes and/or encouraging employees to get on their bikes!