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Can I get a Bike through my Company?

12 March 2020
Jan Friend
Reducing Tax, Payroll, People

Cycling to work – encouraging employees to live more healthily!           

Cycling to work has many more advantages than just saving you money.  First of all there is the obvious fact that it is great exercise, you burn calories, increase cardiovascular fitness and therefore not worry too much about the cake you will have for lunch.  There is also a less obvious advantage which is how it affects your mental health.  Studies show exercise increases endorphin levels, lifts your mood and increases productivity.  Being proactive before work will set the tone for the day ahead.

With Greta Thunberg and Extinction Rebellion grabbing the headlines in recent times many businesses are looking for ways to ‘go green’. Cycling to work is one idea.

More and more employers are encouraging their employees to cycle to work rather than drive or use public transport. Luckily the government provide tax incentives, which makes this arrangement attractive to employer and employee, particularly for owner managed businesses where they are often one and the same!

Larger employers tend to hire cycling equipment using the Cycle to Work Scheme, often through external companies such as Cyclescheme. They then use salary sacrifice schemes, which effectively use some of the employee’s salary to pay the hire costs of the equipment, and save tax and national insurance for the employee and employer’s national insurance by doing so.

If a smaller company wanted to hire equipment under the Cycle to Work scheme for their employees they could do so, however using this arrangement may mean the risk that the employer is deemed to be acting as a credit broker and as such would need FCA authorisation for credit broking. If you act as a credit broker without being authorised this is likely to be a criminal offence. For that reason we would not recommend a client of ours to take that course of action without first taking legal advice.

Our client bank is made up largely of small and medium companies, usually family run, so how can they profit from cycling to work?

From the employer’s point of view the purchase of the cycling equipment qualifies for full tax relief in the year of purchase, assuming they have available annual investment allowance. The company can also reclaim VAT on the purchase. For the employee there is no benefit in kind tax to pay if the equipment is provided to them free to use, provided the ownership of the equipment stays with the employer.

Firstly, let’s look at what equipment is included in the tax exemption:

  1. Bicycles
  2. Tricycles
  3. Cycles with four or more wheels, not being in any case a motor vehicle
  4. Electrically Assisted Pedal Cycle – e-bikes are becoming more and more popular!
  5. Cyclist’s safety equipment

What are the tax implications of loans to employees?

Time for a company electric car?

There are some conditions that need to be satisfied in order for the tax exemption to apply.

Firstly the scheme must be open to all employees, so if a company director wants to pay for his own cycle through his company he would need to provide the same offer to his employees.

Secondly, the bike must be used mainly for qualifying journeys, i.e. journeys from home to work, between one workplace and another or on business trips. Although the employer is supposed to check that the qualifying use has exceeded the non-qualifying use when preparing the annual return of company benefits form (P11D), the government has indicated that by concession no action will be taken to withdraw the relief if the bike is also used for private or leisure purposes.

In addition to the tax exemption there is no benefit in kind for the provision by the employer of cycle parking facilities, provided they are near the place of work. The employer can also pay their employee 20p per mile tax free for any business journeys travelled on their bike.

The really good news is that there is no upper limit on the amount which the employer pays for the equipment – it is all tax free for the employee provided it satisfies the conditions mentioned above!

If you have any questions about company cycles or other employment related queries contact Jan Friend.

The content in this blog is correct as at 11/03/2020. See terms and conditions.

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