The facts:
What are bikes-for-work schemes?
Bikes-for-work schemes are tax-exempt arrangements that encourage employees to cycle to work to reduce environmental pollution and promote healthier lifestyles. The scheme enables employers to fund bikes and safety equipment, and loan these to employees.
Where can employers find more information?
Additional information can be found on the Cycle to Work Alliance’s website: www.cycletoworkalliance.org.uk.
Who are the main providers?
These include: Co-operative Flexible Benefits, Cycle Solutions, Cycle Surgery, Edenred, Evans Cycles, Halfords, Hargroves Cycles and P&MM Employee Benefits.
Implementing bikes-for-work schemes involves employers signing up with a provider and purchasing or leasing bikes on employees’ behalf. The bicycles are lent to staff through a consumer credit agreement, and interest-free repayments to cover the costs are made over 12 or 18 months on a weekly or monthly basis.
Employees can also opt to buy related safety equipment such as lights, reflective clothing, helmets and locks.
The consumer credit agreement allows organisations to lease bikes and safety equipment up to the value of £1,000, including value-added tax (VAT). Employers that wish to offer employees equipment above this limit must apply for an employer-specific consumer credit licence.
Under the scheme’s rules, at least half of the bike’s usage must be for an employee’s commute to work.
Salary sacrifice
The appeal of bikes-to-work schemes may in part lie in the potential national insurance (NI) and tax savings.
Employees can decrease their tax and NI liabilities when purchasing a bicycle for their commute using a salary sacrifice arrangement, which typically offers standard-rate taxpayers savings of 32% and higher-rate taxpayers 42%. On average, employers can save 13.8% of the salary employees sacrifice owing to the consequent reduction in their NI contributions.
Employers make initial investments into necessary equipment on the behalf of employees, and a sum is then deducted from employees’ gross pay.
However, salary sacrifice arrangements are currently under review after the government outlined that it will consider what action will be taken around these in the Spending review and autumn statement 2015 policy paper published in November 2015. It has expressed concern at the growth of salary sacrifice and explained it will be gathering further evidence to inform its approach going forward.
Ending a scheme
Bikes belong to the employer throughout the process. If the employee leaves its employment, the remaining amount is deducted from their net pay and the bike becomes liable for tax.
At the end of the lease, employers can give staff the option to buy their equipment through a transfer of ownership, which uses a fair market value (FMV) payment set by HM Revenue and Customs (HMRC).
Changes implemented in 2012 mean that employers can no longer pass VAT savings onto employees, and it must be accounted for on the monthly amounts paid by staff, because the scheme is regarded as supply of a service.
Health and environmental benefits
Some 86% of employees believe that cycling to work has a positive impact on their health, according to research by the Cycle to Work Alliance published in December 2015. The study also found that among respondents who reported health benefits, 89% said cycling has improved their fitness, 52% believe it has contributed to weight loss, and 46% say it has helped reduce stress.
The research also found that 77% of employer respondents think bikes-for-work schemes have a positive effect on their organisation in relation to employee health.
The allure that bikes-for-work schemes have for staff and employers is clear, especially for those looking to boost health and wellbeing and save tax.
In addition, schemes are an eco-friendly commuting option and help to promote greener transport; 87% of employers say the schemes help reduce their carbon footprint, according to The employer’s guide to cycle to work, published by Edenred in May 2014.
Statistics:
- 86% of employees believe cycling to work positively affects their health.
- 52% of employers agree that bikes-for-work schemes play a significant role in staff engagement.
(Source: The Cycle to Work Alliance, December 2015)
