How to implement a Cycle to Work scheme

Today is Bike to Work Day, an awareness that encourages everyone to leave their cars and bus passes at home and let two-wheeled transport them to their workplace.

Since 1999, small business owners in the UK have been encouraged to promote a Cycle to Work scheme among employees thanks to a handy tax break announced in that year's Finance Act.

For those of you yet to offer the scheme to your employees, today's awareness day seems like the perfect reason to share with you our top tips for implementing the scheme in your workplace.

How do I know if I'm eligible?

Thankfully, employers of all sizes across the public, private and voluntary sectors are eligible to take part in the government's Cycle to Work scheme. The only condition is that the employer makes the scheme available to all its employees - therefore if you intend to only target a certain group of employees, this would go against the rules of the scheme. Please see the HMRC's Employment Income Manual - sections EIM21664, EIM21665and EIM21666 in particular - for further details.

What equipment is included under the tax exemption?

Basically any equipment associated with cycling, from helmets to bikes themselves to puncture repair kits. For a full list, please see this GOV.uk PDF. However, it is up to the employer which equipment is offered, so you can refine the list if necessary. It is also recommended to double check with your local tax inspector if the equipment you've chosen is included.

What do I need to do to set up the scheme?

There are two ways you can go about setting up a Cycle to Work scheme:

  1. Salary Plus

A simple way of offering the scheme to your employees is by buying a bike and loaning it to an employee so that they can travel to work. Known as a 'salary plus' arrangement, this will mean the employee's monthly wage is not affected. However, some businesses will want to recover the cost of providing the cycle and loaning the equipment to their employee.

  1. Salary sacrifice

For such small businesses, the salary sacrifice should be the preferred option. This involves an employee giving up part of their contracted wage. It is important to note that this is not a deduction of salary or a charge on the salary, but is instead where an employee agrees to waive a certain part of their salary in return for the employer agreeing to give them some kind of benefit. Please note however that the salary sacrifice will affect the amount of tax and National Insurance you will pay, so please check the government PDF above for full details around how it will affect your tax status.

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