Cycle to Work Scheme
Cycle to Work (Salary Sacrifice) is a simple scheme whereby an employer can provide staff with an electric bike ‘tax free’ at approximately half the retail price and at no cost to the company.
- The employee obtains the bike of their choice ‘tax and vat free’, by saving on the PAYE and NI contributions.
- In addition the company saves the national insurance (12 .8 %) on the reduced salary whilst providing its staff with an excellent benefit that provides an efficient and environmentally friendly form of transport.
- The company can treat the cost as capital expenditure and claim capital allowance in the normal manner.
- The additional, and hopefully obvious, benefits include a healthier, motivated and timelier workforce who will not require costly parking facilities at work, estimated at around £2000 per space.
So How it works
The company you work for has to set up a ‘cycle to work’ scheme*, purchases the chosen bike and ‘loans it‘ to the member of staff over a fixed period.
*For the company this means the HR department sets up a simple salary control system.
The member of staff then commits to a small monthly reduction in gross salary thereby fully mitigating the cost to the employer.
The Green Transport Plan is approved by the Inland Revenue, Department for Transport, (cycle to work), and Customs and Excise.
5 Simple Steps
The simple process of the scheme is as follows:
Step 1 Staff choose the Electric Bike they wish to purchase from the web site or calls for a brochure to be emailed.
Step 2 Employer and employee sign a simple ‘hire & salary sacrifice agreement’ determining the length (18 months recommended by Office of Fair Trading) & terms of the scheme.
Step 3 Employer orders the bike.
Step 4 The employer begins to reduce the employee’s monthly salary by the appropriate amount.
Step 5 At the end of the term the title to the bike can be transferred for 5% (+ Vat) of it’s original R.R.P of the product.
All SYEBC bikes are in theory accessible but it does depend on the maximum voucher amount your company will allow. The usual upper limit is £1,000. We can still help you to take advantage of the Cycle2Work scheme by selling you the bike without the battery and charger (and may be a few other components) and allowing you to buy these separately. Therefore you have a bicycle going through the Cycle2Work scheme and the electrical upgrades you buy and own separately.
Fortunately, this government inspired travel to work scheme and tax break does not involve much red tape. However there may be some ‘rules’ that may affect some companies or individuals e.g. an individual who’s salary would drop below the national minimum wage would not be eligible.
The key rule however is that the scheme and loan bike must be used mainly (51%) of the time, for travel to and from work
For example, travel between one workplace and another. Or cycling to & from the train station would qualify. We have a simple check list together with Department for Transport and HM Customs and excise information sheets that we will provide to you when you decide to enrol onto the scheme, allowing you to ensure that you satisfy the simple terms.
Why is it VAT free?
HM Customs & Excise plus the Dept for Transport CTW scheme guidelines are quite clear that the VAT for VAT registered companies is A, recoverable, and B, not chargeable.
What happens to an early leaver?
This should be covered in the agreement in that if an employee leaves the company before the 18 months has expired they simply settle the balance due.
What happens to the bike at the end of the term?
The company can opt at the end of the term (not before) to transfer title to the bike at a fair market value, HM Revenue have advised that 5% + Vat of the original R.R.P. is appropriate.
How does the company save money?
As the actual salary has been reduced, then the class one national insurance due at 12.8% is reduced.
Does the scheme affect my T&C of employment?
It should not adversely have any affect and can be covered in the salary sacrifice agreement.
Who is responsible for the bike?
It is recommended that the employee be responsible to ensure that the bike is properly insured (inc public liability) and maintained.
Is the bike covered by warranty?
Is an electric bike covered under the scheme?
Does the company need a consumer credit licence? No, the Office of Fair Trading have issued an automatic ‘blanket’ licence that will cover all companies operating a legitimate cycle to work scheme. This is not a hire purchase agreement.
Can I buy additional equipment for my bike? Yes you can add safety equipment such as helmets (recommended) lights reflective clothing, locks etc when you order the bike and include the cost in price of the bike.
How much can I spend? The Office of Fair Trading advises that an upper value of £1000 is recommended in order to keep within the guidelines of the scheme and group consumer credit licence, however if your company has a consumer credit licence it may be able to offer a higher limit.
Are there any hidden charges? No, we do not charge a fee or commission to either the employer or the employee for participating in the scheme.
What happens if too many staff take up the offer? Great news for the company, and if the company’s cash flow looks like it will suffer then leasing can be easily arranged.