The cycle to work scheme was introduced back in 1999. It was the governments way to encourage people to make healthier choices by helping them save money on buying a bicycle.
The Department for Transport (DfT) has recently announced that the previous £1,000 limit on the cost of a bicycle provided under the scheme has been removed. This means that employees can now buy a bike of any value via the cycle to work scheme.
Can employers set their own cycle to work scheme limit?
Employers can still set a limit on their own cycle to work scheme with their provider. However, if employers want to increase their limit beyond £1,000, they are allowed to. This will only apply where the employer uses a firm authorised by the Financial Conduct Authority (FCA) to hire out cycles to employees who use them to commute to work.
The UK Government hopes that this will encourage even more people to take up the scheme as they will be able to buy the bike they want. Encouraging people to get on their bikes is beneficial for everyone, less congestion, healthier employees and lower carbon emissions.
Reminder – where the cycle is provided under a ‘salary sacrifice arrangement’ there is to be no taxable benefit if the amount paid by the employee is within HMRC approved limits. Also, where the bicycle is transferred to the employee after 6 years, HMRC accept that value is small and therefore not taxable.
The provision of a bicycle to employees under the governments cycle to work scheme is an exception to the general rule introduced from April 2017 where the amount taxable is the greater of the salary foregone and the taxable benefit as set out in the tax legislation.
Other exceptions to the general rule include employer pension contributions and childcare vouchers.
How do you set up a cycle to work scheme?
The UK Government has published guidance on how to implement a cycle to work scheme in the workplace on their website.
We can also help you with this and any other tax related issues. Please contact us by email or on 01295 250401 or contact us here and we will get back to you.