What is the Cycle to Work Scheme?

The Cycle to Work Scheme is a great way for small businesses to save money and promote healthier lifestyles amongst their employees. It allows employers to provide their staff with bikes and safety equipment, which they can pay off monthly through salary sacrifice payments.

This helps the business save on National Insurance contributions and encourages employees to use cycling as an alternative form of transport or exercise. Not only does this have potential health benefits, but it may also help reduce traffic congestion during peak times.

The scheme is easy to set up and manage, making it an excellent option for small businesses looking to support their staff while saving money.

How to set up a Cycle to Work Scheme

If you’re interested in setting up the Cycle to Work scheme for your business, there are a few things you’ll need to do. First, register with one of the Cycle to Work scheme providers. There are a number of different providers available, so you should be able to find one that meets your needs.

Once you’ve registered with a Cycle to Work scheme provider, you’ll need to set up a scheme for your employees. You’ll need to decide what kind of bikes and cycling equipment your employees can buy, and you’ll also need to determine how much they’ll need to pay each month.

Once you’ve set up your scheme, your employees can start buying bikes and cycling equipment through salary sacrifice. This means that they’ll save on tax and national insurance, and they’ll also be able to spread the cost of their new bike or cycling equipment over a period of time.

You might want to look into setting up your own scheme for some businesses, but using a provider makes it easier.

How the Salary Sacrifice Scheme Works

The Cycle to Work scheme allows employees to buy bikes and safety equipment through salary sacrifice payments. This means the employee pays for the item from their gross salary, meaning they will not be taxed or have National Insurance contributions on the amount.

The business doesn’t pay class 2 NI on the amount. This makes it a win-win situation for both parties; The employer saves on NI contributions, and both parties benefit from the health and environmental benefits of cycling.

The scheme also offers flexibility in payment plans, allowing businesses to set up flexible payment plans that meet their budget needs while still providing employees with an affordable way to purchase a bike or related items. It is important to note that employers must apply certain rules when setting up their salary sacrifice schemes to ensure they comply with legislation.

Cycle to Work Scheme Rules

Important regulations must be followed to ensure employers and employees abide by the Cycle to Work scheme rules.

• The employee must not at any point own the cycle during the hire period.
• At least 50% of the journeys must qualify as business journeys, but you do not need to keep records.
• The scheme must be available for the whole workforce.
• The hire is typically for at least 12 months.
• There is no limit to the cycle value
• It does not include the self-employed
• The employee must be paid the minimum wage and not sacrifice the salary to below the minimum wage.

Complete guidance is available on the Government website.

What Can you Include in the Hire Agreement?

Only bikes and safety equipment can be purchased through salary sacrifice payments. This means any other cycling-related items, such as clothing or accessories, cannot be included in the scheme.

Additionally, employers must apply certain restrictions when setting up their salary sacrifice schemes to comply with legislation. These include limiting how much employees can spend each month on their bike or cycling equipment and ensuring all purchases meet certain standards for safety and quality.

Finally, businesses need to keep accurate records of all transactions made through the cycle-to-work scheme to track spending over time easily.

What Cycle and Safety Equipment is Included in the Scheme?

Employees wishing to use the scheme have a choice for the sort of bike they want to have. The choice includes:

• Standard bikes include racer, road, mountain, folding, hybrid/commuter and off-road.
• Electric bikes – Electric Assisted Pedal Cycle (EAPC)
• Mobility bikes, including trikes, hand-cycles and a bike with adaptions – This is to allow employees with disabilities to join the scheme.

Safety is not set by legislation but can include helmets, bells, lights, mirrors, mudguards, panniers, child safety seats, locks, pumps, repair equipment and reflective clothing.

What Happens at the End of the Scheme?

At the end of the hire period, the employee can either

• Purchase the bike or cycling equipment from their employer at a fair market value.
• Keep the equipment for free, and for tax purposes, it is a benefit in kind.
• Extend the duration of the hire agreement or enter a new hire agreement.

By extending the scheme for another 12 months, employers can ensure employees have enough time to pay for their bikes or equipment while offering them a cost-effective way. This makes it an ideal solution for businesses promoting healthy and sustainable commuting without breaking the bank.

Can you Have More than one bicycle?

Yes, employees can have more than one bike during the salary sacrifice period. An example of when two cycles might be required is if the employee catches the train for work and they use a bike at either end of the train journey.

What is the maximum value for a bike?

The is no maximum value of the scheme, but if it is above £1000, authorisation from the Financial Conduct Authority needs to be obtained if you run your own scheme.

Should the Bike be Insured

Yes, it is the employee’s responsibility to insure their bike. This can be done through a specialist cycle insurance provider or home insurance policy.

It is important to note that the employer’s general liability insurance does not cover the bike.

Accounting for Cycle to Work Scheme

The bike is classed as an asset to the company. There it is depreciated in the usual way.

When recording staff salary, you should be able to choose a cycle-to-work payment as a deduction. Once the payslip is produced, enter the figures into the accounts normally.

Conclusion on Cycle to Work Scheme

The Cycle to Work scheme is great for employers and employees to take advantage of an affordable, sustainable commuting option with tax savings.

The rules around the scheme are simple; all that’s required is for businesses to comply with legislation by limiting how much their employees can spend each month on bikes or related equipment, keeping accurate records of transactions over time and ensuring safety standards are met.

With this in mind, employers should feel confident introducing salary sacrifice schemes into their business plans. It provides them and their workforce with a cost-effective solution while promoting healthy habits like cycling.