Key facts
What are bikes-for-work schemes?
These are tax-free loans that can be operated under salary sacrifice. Employers buy the bike for an employee and the amount is deducted in equal instalments from gross salary. Staff make savings off the retail price of a new bike as a result of tax and NI savings.
Employers can find out more information at these websites:
More information is available from the:
Cycle To Work Alliance, Department for Transport and
Why Cycle?
Some of the main providers in this field are:
Bike 2 Work Scheme, Cyclescheme, Cycle Solutions, CycleSurgery, Evans Cycles, Halfords, P&MM, Transport for London.
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Bikes-for-work schemes offer tax and national insurance (NI) efficiencies, as well as other advantages for both employers and employees, explains Nick Martindale
Set up in 1999 as part of the government’s green transport initiative, the bikes-for-work scheme allows employers to buy bikes on behalf of employees, who then lease them back over 12-18 months, typically via a salary sacrifice arrangement.
According to the Cycle to Work Alliance, 15,000 organisations and 400,000 staff take part in a scheme and demand is likely to rise.
The main benefit of a cycle scheme for employers is as a staff motivation and retention tool, says Keith Scott, head of business services at Halfords. Also, fitter staff can mean fewer sick days taken.
One of the main attractions is the tax advantages of such schemes. Employees make payments from their gross salary, using the PAYE system, reducing their taxable income and saving on national insurance contributions (NICs) for both employee and employer. Laurence Boon, relationship manager at Cyclescheme, which operates a partner store network with 1,750 independent bicycle retailers, says: “The only costs are the initial package purchase. This is not only recouped but, due to the [NIC] savings, an employer will save money.”
Price saving
Employees, meanwhile, get an affordable means of renting a bike and, if they want to, eventually owning one, saving as much as 50% on the original price.
The average value of bikes bought under a scheme is about £700. The maximum amount allowable per employee is £1,000, but in the current climate cheaper models are proving more popular. “There has been a marked increase in the number of applications for bicycles for £200 or less, suggesting staff are becoming increasingly engaged with the scheme and are looking for a cheap travel alternative,” says Halfords’ Scott.
However, employers must bear in mind that there are implications in taking up a scheme for under-18s or staff on the national minimum wage. Under-18s must get a parent or guardian to sign an agreement for them. Staff on the minimum wage cannot participate, but those earning just above it may be able to sacrifice an amount that would not take them below the minimum.
There are a range of bikes-for-work providers, so it is important to research the market. Simon Harris, tax-free cycle manager at CycleSurgery, says: “Choose a scheme that offers a good selection and the face-to-face advice [staff] need when purchasing a bike. Many online companies simply send bikes by post, and the employee can end up with the wrong frame size or be left to assemble the bike themselves.”
Mark Brown, head of Ride2Work at Evans Cycles, adds: “The provider should have specialist local stores available for staff to test and select equipment and an online system for administration and to order goods.”
Bikes-for-work schemes suffered some uncertainty after HM Revenue and Customs’ (HMRC) review in 2010, but in February this year the Office of Tax Simplification recommended the scheme’s tax-efficient status be retained.
In July HMRC announced that, from 1 January 2012, value-added tax (VAT) will be imposed on the provision of several benefits offered via salary sacrifice, including bikes-for-work schemes.
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