As part of the Government’s Green Transport Plan companies can provide bicycle and safety equipment to its employees as a tax-free benefit.
What is included under the tax exemption?
The exemption includes any “cycle”. This can be a bicycle, tricycle or even a cycle with four or more wheels! Electrically assisted pedal cycle can also be included under the scheme. Motor vehicles are of course not included.
Safety equipment is also meets the tax exempt. This can include:
- Cycle helmets
- Locks and chains
- Pumps, puncture repair kits and cycle tool kits
- Reflective clothing
There is no limit on the total value of the equipment including the cycle that can be provided. The equipment can be purchased second hand if this is the company’s preference.
Loaning the equipment
The exemption removes the tax charge on the equipment loaned to employees provided the following conditions are met:
- Ownership of the equipment is not transferred to the employee
- Employees use the equipment mainly for qualifying journeys (more than 50% business including commuting)
- The offer of cycle equipment is available across the whole workforce, with no groups of employees being excluded. Of course not all employees have to take the company up on this offer.
Setting up a Cycle to Work Scheme
The employer can simply buy a cycle and safety equipment and loan it to an employee for qualifying journeys to work. This would mean that the employee’s normal salary arrangements are not affected.
If however the employer wants to recover the cost of providing the cycle and safety equipment from the employee this can be done through a salary sacrifice arrangement.
Employers who purchase cycles and safety equipment to loan to their employees will be able to treat the cost as capital expenditure and claim capital allowances in the normal manner. They will also be able to reclaim the VAT.