Helm News: New Guidance on Cycle to Work Schemes
The Government supported Cycle to Work Scheme allows employees to sacrifice a portion of their pre-tax salary towards the cost of loan bicycles and cycle safety equipment from their employer for the purpose of cycling to and from work.
The Cycle to Work Alliance, a group of the leading Cycle to Work scheme providers in the UK that includes Evans, Halfords and Cyclescheme has confirmed that HMRC provided clarity at the end of 2012 regarding the purchase of safety equipment through Cycle to Work schemes. Previously it had been believed that, in order to take part in the scheme, an employee must sacrifice salary towards the cost of a loan bicycle in all instances and safety equipment could then be selected in addition.
However, HMRC has now advised the Alliance that as long as the loan of the equipment meets the conditions in the legislation, there does not need to be a cycle involved. Guidance published by HMRC has confirmed that employees are able to make salary sacrifice payments towards the loan of:
- a bicycle;
- or a bicycle and cyclist’s safety equipment; or
- cyclist’s safety equipment (independent of the loan of a bicycle).
It is important to note that, for a scheme to be valid, an employer is required to make both bicycles and cyclists safety equipment available to its employees.
What happens at the end of the loan period?
At the end of the loan period, employers may give employees the opportunity to buy their cycle and safety equipment. One way of determining the value of the cycle and safety equipment is to use HMRC’s valuation table. In using the valuation table, the original price of the cycle includes safety equipment fitted to the cycle, but not safety equipment which had been worn by the cyclist.
HMRC believes that “where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment.”
Safety equipment is defined as any equipment that employees need to get them safely to and from work throughout the year. Safety equipment attached to the bike, and therefore subject to HMRC’s valuation table includes:
- Lights, including dynamo packs
- Bells and bulb horns
- Locks and chains
- Mirrors and mud guards
- Children’s seats
Safety equipment not attached to the bike, and therefore not subject to HMRC’s valuation table includes:
- Reflective and high-visibility clothing and accessories
- Helmets (which conform to European standard EN 1078)
- Panniers, luggage carriers and straps, and bags
- Pumps, puncture repair kits and cycle tool kits
- Cycle clips and dress guards
What does this mean for Employers?
For many employers, this further guidance presents an opportunity to remarket existing Cycle to Work schemes. Many schemes that have reached maturity with regard to bicycles may see renewed interest from employees who would like to replace some or all of their safety equipment in an income tax and National Insurance efficient manner. Cycle to Work schemes continue to provide Employer National Insurance Contribution saving for employees. Next Steps If you would like to discuss further how this will work in practice or how you might remarket or relaunch your existing scheme or launch a new scheme, please do not hesitate to contact your usual Helm Corporate consultant or Ed Smithson at 020 7614 1026 or by email at: firstname.lastname@example.org.