Get On Your Bike

The Cycle to work scheme

Thursday 6th August 2020 is Cycle to Work Day and although recently many of us have forgotten what commuting life feels like, we thought it would be useful to highlight some of the advantages that cycling provides to your business and your employees.  Hopefully this blog can convince you that cycling to work should become part of your “new normal”.

There has been a big push in recent times to get more people active and cycling has been identified as an area the Government are keen to push, announcing earlier this year it will be pledging £1 billion to help build a network of new high quality separated cycle routes and safe junctions in towns and cities across the UK.     

Apart from the obvious health benefits that being more active brings, it has been proven that cycling has a significant positive impact on your well-being and mental health and improves productivity in the workplace.  The health benefits are matched by the cost savings with the average commuter saving around £1,400 a year by choosing to cycle rather than drive or use public transport.  As well as making you healthier and richer, cycling has a positive impact on your local environment ensuring there is less congestion and the air you breathe is cleaner.

So what is the best way to make cycling a part of your business and available to your employees?  The answer is the Cycle to Work Scheme.

The Cycle to Work Scheme has existed in different forms for the last twenty years but has recently exploded in popularity as cycling has become more mainstream.  The modern scheme provides an efficient way for a business to provide a bike and cycling accessories to its employees by making it cheaper for both the employer and employee by providing tax efficiencies.

How it works for the employee

The Cycle to Work Scheme is a salary sacrifice where the employee agrees to give up part of their pre-tax salary in exchange for the hire of a bike, or bike accessories, to enable them to commute to work. 

Since a portion of the employee’s salary is forgone, the employee pays less tax and National Insurance Contributions.  If the employee decides to buy the bike at the at the end of the hire period then further savings can be made as the price the employee pays for the bike is discounted depending on the amount of time it has been owned.

Points to note

• The employee cannot use their own funds towards the cost of goods being hired and must not, at any point during the hire period, own the bike or cycling equipment

•  At least 50% of the cycle’s use must be for “qualifying journeys” i.e. commuting

• The salary sacrifice arrangement is typically for at least 12 months

• At the end of the hire period the employee can decide to

1.       Extend the hire agreement

2.      Return the cycle and equipment

3.      Buy the cycle and equipment under a separate agreement entered into at the time

How it works for the employer

Any employer, of any size, across the public, private and voluntary sectors can run a Cycle to Work Scheme.  You can set up and run your own salary sacrifice scheme, or there are Cycle to Work scheme providers who can run the scheme for you.  Scheme providers will normally;

• Ensure the scheme is fully compliant with legislation

• Administer the scheme for you, reducing complexity

• Advise you on salary sacrifice arrangements

• Help you promote the scheme to your employees

The scheme allows the employer to save on employer National Insurance Contributions at 13.8% of the salary sacrifice or, if you are using a scheme provider, this will be passed on to the scheme provider. 

The cost of the bike or cycling equipment will be counted as capital expenditure and thus will qualify for the Annual Investment Allowance (AIA) and will be 100% deductible against the business’s taxable profits.

The Cycle to Work Scheme is a great initiative to help employees and employers promote the benefits of cycling and if it hasn’t done so already convince you to make it part of the “new normal”.

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FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.