Are you keen to help your team be more fit and healthy?
Want to offer a very popular employee perk which provides the company with a 13.8% saving on class 1 national insurance contributions?
Is being green of important value to your business?
Then you may wish to take another look at the UK Government Cycle to Work Scheme, which has recently been expanded to include e-bikes, the original £1000 cost limit has also been removed.
The cycle to work scheme was introduced back in 1999, to promote healthier journeys to work and to reduce environmental pollution, with owners of businesses becoming more concerned about their carbon footprint, this scheme has become more relevant than ever.
Cycle to Work allows staff to enjoy the loan of cycles and safety equipment as a tax-free benefit. Employers ‘purchase’ the equipment on their behalf, either directly or via one of the many cycle schemes that have been established. Equipment is on offer too – everything from cycle helmets, reflective clothes, bells, lights, mirrors, shoes, locks and pumps to GoPro cameras and SatNav systems.
How the Cycle to Work scheme works
Employees ‘sacrifice’ part of their pre-tax salary each month for use of the bike, usually over a 12-month period.
- The employee saves as the rental payment made for the use of the bike is deducted from their gross salary before National Insurance and income tax is calculated
- The employer saves on National Insurance contributions at 13.8% of the cost of the bike. So, if you buy a £600 bike for an employee, you will reduce your NICs for that individual by £82.80 over the hire period
To benefit from tax exemption a business’s cycle-to-work scheme has to meet certain conditions as detailed below, so we highly recommend that you sign up to a recognized scheme provided by a Government-approved third-party.
There are some conditions that must be met.
- The employee cannot own the cycle during the hire period – they must be renting it. Of course, they can purchase the bike at the end of the hire period based on a depreciated valuation.
- At least half of the bike’s use must be for commuting to work.
- Everyone in the business must have access to the scheme.
There are no barriers to who can have a cycle and many schemes consciously ensure it is available to employees on the minimum wage. At the end of the loan period, some schemes allow employees to purchase the bike, often spreading the repayments, for a fraction of the original cost.
Employers benefit by having happier, fitter teams and will save 13.8% of the total value of salary sacrifice because of reductions in the amount of National Insurance Contributions due. There are also many indirect benefits:
Fitter, healthier staff with (probable) improved productivity – cycling improves physical health and stamina.
Improved attendance – cycling has a positive effect on emotional health, improving levels of wellbeing, self-confidence, and tolerance to stress.
Environmental benefits – good news for your corporate social responsibility.
Reduce parking requirements – by reducing the number of cars in the car park, you could save money on rent, sell some land, or repurpose the space for other uses.
Recruitment and retention – being part of the scheme demonstrates your commitment to your employees: their health and welfare.
Capital expenditure – the cost of cycling equipment can be treated as capital expenditure so employers can claim capital allowances against it.
Cycle to Work really does offer businesses a great opportunity to support their staff and the environment, if you want to know more, head to the government website for implementation advice, or reach out to us here at HB Accountants. We would be happy to help.
HB Accountants are accountants for business. We understand how you can make sharper, better business decisions when you really understand your financial position and we are keen to help you deliver this transparency in the best manner for your business. For guidance on whether a cloud-based accounting system would help your business, please talk to us. We’re still working hard to help you make the right decisions.
Our Covid19 hub is still available to any business that needs accounting support and our team is on hand for bespoke consultations.
Visit our COVID19 Business Hub for more information
For financial and accounting guidance and support, please contact Keith or Karen. We’re still working hard to help you make the right decisions.
Or call 01992 444466 or email directors@hbaccountants.co.uk for help. We look forward to hearing from you.
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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above
