Cycle To Work Scheme
What is Cycle To Work?
The Cycle to work scheme enables employees to obtain a high value bike that they would not be unable to afford if they were to pay the cost up front themselves. The employer/organization pays for the bike and “hires” it out to the employee. The employer claims their hire fee over 12 months from the employee by making deductions from the employee’s gross pay. The amount claimed back from the employee is the entire value of the bike spread over a period of twelve months. The Scheme can be implemented for as little as one member of staff and provides savings for both the business and the employee.
Setting up the scheme.
- Cycle To Work will set up the scheme for you in partnership with either Cycle Solutions or Halfords (you can choose the best partner for you)
- They will help promote your scheme to all of your employees. This is important as the scheme has to be made available to the entire workforce.
- The employees choose their bike and/or safety equipment up to the value of £1000 (including VAT).
- The employees sign a hire agreement, with payment coming out of their gross monthly salary – that means they can save up to 47% of the cost through income Tax and National Insurance savings (if you are a higher rate tax payer, or 32% if you are a standard rate tax payer). The employers make a saving on Employer’s NI on the amount of salary sacrificed (at 13.8%).
- The Bike must be used mainly (more than 50%) for qualifying journeys i.e. between home and work (or part of this travel e.g. travel to the train station). If this qualifying condition is not met the salary sacrifice cannot be used to save tax and national insurance.
- The bike and/or safety equipment can either be delivered to or collected by the employee.
End of the scheme options
- If the employee does not want to keep their bike and equipment then it can be arranged for the goods to be returned or collected.
- If the employee does want to keep ther bike and equipment and they don’t want to minimise their expenses the employee can pay the market value of the bike and equipment. ( Ususally 18%-25% of the original price). This must be market value to avoid a benefit in kind arising on the transfer.
- If your employee does want to keep their bike and equipment and they do want to minimise their expenses then the employee can carry on with the scheme with Cycle Solutions for a small refundable deposit of 3%-7%. They will have no further payments. 36 months after this Cycle Solutions will contact your employee to see if they want to keep their bike and equipment. If they don’t then they can send their bike and equipment to Cycle Solutions and they will refund their deposit. If they do want to keep their bike and equipment then they will get a receipt from Cycle Solutions and Cycle Solutions will keep their deposit.
If you decide to set up a cycle to work scheme and your employees hire a bike through the scheme, please let our payroll team know in order that we can set up the salary sacrifice over the 12 month period.