This is the guidance that should be followed by an employer who wishes to put in place a cycle to work scheme.
Cycling/walking to work has many benefits for the individuals, businesses and the society. For the individuals it means that their journeys are cheaper and better for their health. For the businesses it means increased productivity and increased footfall in shops. And society as a whole benefits from the decrease in congestion and other environmental effects.
What this guidance does
The document developed by the Department for Transport, HM Treasury, HM Revenue and Customs (HMRC) and the Financial Conduct Authority (FCA) in 2017 offers guidance to employers on Cycle to Work schemes, including employee benefit schemes, which if are successfully carried out will bring financial benefits to both employers and employees.
The employer guidance covers:
- options on setting up a cycle to work scheme
- salary sacrifice and national insurance contribution.
It also reflects the tax and legal position at the time of publication.
Options for Cycling to Work
The document mostly focuses on the Cycle to Work schemes using the salary sacrifice which works as the primary example of most other schemes.
However, other schemes that are mentioned include:
- Loan scheme – In this scheme the employer gives their employees loans for buying cycles or safety equipment.
- Pooled Schemes – During this scheme the employers themselves purchase bicycles for the employees and make them available accordingly.
How the salary sacrifice scheme works
Salary sacrifice scheme works when the employee agrees to sacrifice part of their salary for a benefit, which in this case is the hire of a bicycle or safety equipment.
How it helps to save finances for the individual and the business:
If the scheme meets the relevant criteria it can benefit from a tax exemption, which means that the money is saved because when the salary is lessened due to the sacrifice the individual will pay less taxes on it, meaning they can save a respectable amount of money to make up for the sacrifice.
Here is an example how employers can save:
|Examples of hire
It should be noted that the salary sacrifice arrangement is typically for at least 12 months. This is
irrespective of the length of the associated hire agreement. And it also has certain conditions that must be followed through in order for the scheme to succeed.
Eligibility to different people
All employers can apply this scheme. However the tax and NI benefits only apply to to staff who are treated as employees for tax purposes.
In the case of the employee being under the age of 18 you may not want to enter into a hire agreement with them or set an adult to act as a guarantor.
This does not include people who are self-employed.
The equipment includes regular bicycles, tricycles, or a cycle with four or more wheels (motorcycles are not included).
The employers are responsible in having the safety equipment being compliant in the scheme.
In the case of the person having a disability the cycles can be adapted (e.g. tricycle, hand-cycle,
Cycle to Work scheme providers
You can set up and run your own salary sacrifice scheme, or there are Cycle to Work scheme providers who can run a scheme for you.
Scheme providers will normally:
• Ensure the scheme is fully compliant with legislation;
• Administer the scheme for you, reducing complexity;
• Advise you on salary sacrifice arrangements;
• Help you promote the scheme to your employees.
Using this arrangement typically means that your employee enters into a consumer hire agreement directly with the scheme provider. The scheme provider will need authorisation by the Financial Conduct Authority (FCA).
Depending upon the circumstances, you (the employer) may be acting as a credit broker, and so may need FCA authorisation. There is relevant guidance in PERG 2.3 in the FCA’s Perimeter Guidance Manual.
Since their launch in 2017 in accordance with the Cycling and Walking Investment Strategy, Cycle to Work schemes have attracted over 40,000 employers across the country and helped more than 1.6 million commuters to cycle to work.
Image: Cambridge, UK © MIB