We’re sure you’re already aware of the various cycle to work tax and NI exemption schemes, helping to encourage healthier journeys to work and support low carbon initiatives. The schemes allow businesses to loan bicycles and bicycle safety equipment to their employees, including directors, without considering it as a taxable benefit in kind.
The incentive has proved to be hugely popular and there are now several ‘cycle to work’ providers offering their ‘ready-made’ schemes to businesses and organisations. Working with an existing scheme provider is often preferable for businesses as they do not incur the initial expense of purchasing the cycles and equipment. A scheme provider will cover this cost, and the equipment is then hired to the business and in turn made available to their employees. The scheme provides the hire contracts for the employees, and this is where the £1,000 cap comes into force.
The hire contract agreements provided by the ready-made schemes are covered by a group ‘consumer credit licence’ which automatically covers the hire or loan of bicycles where their value does not exceed £1,000.
There is an alternative available, which allows more expensive bicycles to be used. A business can buy the bicycles and make them available to their employees and directors, without a hire agreement or loan contract. The exemption will still apply but there would be no issue with consumer credit and the price cap. Whilst there would be more money for the business to pay out, there is more help available from HMRC, such as reclaiming the vat and possible capital allowance (CA).
If some employees are happy with the price cap of £1,000, businesses can always use a combination of both options – keeping their staff teams happy and healthy!
For further information and advice on lending/hiring bicycles to employees visit https://www.gov.uk/expenses-and-benefits-bikes-for-employees