Rennie Welch LLP
A: The Cycle to Work Scheme is a tax exempt loan scheme. To qualify for the tax exemption the cycles and safety equipment must be available to employees generally, ownership of the cycling equipment must not be transferred to the employee during the loan period and employees must use the cycling equipment mainly (more than 50%) for qualifying journeys (i.e. between home and the workplace or between one workplace and another) in connection with the performance of their duties.
If these conditions are met, the employer can buy or lease the cycling equipment and loan it to the employee without any impact on salary arrangements.
Where the cycling equipment is purchased by the employer, the employer will be able to claim capital allowances in respect of this.
Where the cycling equipment is leased by the employer, the leasing costs are deductible as a business expense.
Where the above conditions are not met or the employer wishes to recover the cost of the cycling equipment from the employee, the scheme is instead operated as a salary sacrifice arrangement, whereby the employee gives up the right to part of their cash remuneration in exchange for the loan of the cycling equipment.
No income tax or Class 1 National Insurance will be payable in respect of the salary that has been sacrificed providing certain stringent conditions are met. The use of a salary sacrifice arrangement may, however, have an impact on the employee’s current or future entitlement to statutory payments, benefits, pension contributions and other earnings-related payments.
An agreement for the loan of a cycle and safety equipment under the Cycle to Work Scheme is a regulated agreement under the Consumer Credit Act and a consumer credit licence may be required.
Rennie Welch LLP accept no liability on the basis of this article and detailed advice, taking into account individual circumstances, should be obtained before entering into any transaction.
z Have you got a question you would like us to answer in our column? If so please email your query to email@example.com.