Ten tips to get your Cycle to Work scheme on the road
These days, businesses of all sizes can help their employees adopt a healthier commute through the Cycle To Work scheme. Since 1999, it has been estimated that over 32,000 business, including significant numbers of SMEs, have implemented the initiative. Benefits include tax savings for both employer and employee, a healthier workforce and reduced carbon dioxide emissions. Lyle Metcalfe from Electric Bike Store www.electric-bike-store.co.uk explains how you can get on track.
(1) There is no need to register with HMRC. To get started, all you need to do is advertise the scheme and its benefits to your employees.
(2) You can set up your Cycle to Work scheme either direct with the retailer(s) of your choice, or via an organisation like CycleScheme http://www.cyclescheme.co.uk/ .
(3) You then purchase the bike of your employee's choice, up to a value of £1,000 (or £4,500 if you hold a Consumer Credit licence). The employee pays you back over 12 months (or more) of salary sacrifice. During this period however, they are technically ‘loaning' the bike from you rather than purchasing it. The employee needs to be made aware that at the end of the agreed period, there ‘may' be an option for them to purchase the depreciated, second hand bike from you as a separate agreement. Usually a nominal figure is agreed by both parties.
(4) In simple terms, the Cycle To Work scheme allows an employee to purchase a bike tax free out of their gross salary. But it's all in the wording. You must not enter into what looks like a hire purchase agreement with your employee. The full conditions for the tax exemption to apply are laid out in the Income Tax (Earnings & Pensions) Act 2003 (ITEPA).
(5) To take advantage of the tax savings, you must be seen to promote the scheme to all of your employees, with just a couple of exceptions. It is not available to under-18s because of differences in how consumer credit laws apply to minors. The scheme is also not available to any employee whose salary would fall under NMW once a period of salary sacrifice began. Further information on general availability can be found in the Employment Income Manual on the HM Revenue and Customs website at EIM21664, EIM21665 and EIM 21666
(6) Employers who purchase bikes and related safety equipment for ‘loan' to their employees will be able to treat the cost as capital expenditure and claim capital allowances in the normal manner. For many small businesses, this expenditure will qualify for the Annual Investment Allowance (AIA). The AIA allows businesses to write off 100% of qualifying capital expenditure - currently up to £100,000 each year - against the businesses' taxable profits.
(7) By ‘loaning' the bike under salary sacrifice scheme, you will further save Secondary Class 1 NICs (at up to 12.8%) on that part of the employee's gross salary sacrificed. For example, if you were to ‘loan' a bicycle worth £750 over 18 months, the employee would sacrifice in total £750 of gross salary, generating Employer's NIC savings of £96.
(8) The Cycle To Work scheme also applies to the increasingly popular electric bicycles. Although purchasing such a vehicle will more than likely push your employee over the £1,000 cap, there are still ways and means of securing their bike of choice. Chat to your friendly local electric bike store.
(9) Purchases under the scheme can also include cycling equipment, such as cycle helmets, specialist reflective clothing, bike locks, puncture repair kits and child seats.
(10) It is not hard to sell the health benefits of cycling to work. Perhaps the best known study followed 30,000 Danes and found that those who cycled to work had a 40% lower incidence of heart disease (Andersen et al, 2000).
Post Date: November 18th, 2014