The English summer is here, barbeques are in full swing and suddenly gardens are getting the loving attention they deserve. Oh life really couldn’t get better!?
Until Monday morning that is, your alarm goes off and you know you have to face the crowded, over-heated herd of commuters on the underground or sit in traffic baking while bikes just ease by.
Let’s face it, there really hasn’t been a better time to get on your bike and take advantage of some unusual generosity from HM Revenue & Customs, which allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit.
Employers of all sizes across the public, private and voluntary sectors are eligible to implement a tax exempt loan scheme for their employees. To qualify for the tax exemption, the cycles and cyclists’ safety equipment loaned by the employer under the scheme must be available to all employees.
How the Cycle to Work Scheme Works
Step 1) The employer has to agree to pay for the bike and pay the bike retailer directly. The employee can choose a bike with a value of up to £1,000.
Step 2) The employee needs to confirm purchase with a Cycle to Work Scheme admin company such as Cyclesheme who will then issue a voucher.
Step 3) The employee presents the voucher to the bike retailer in exchange for the bike.
Step 4) The Company agrees with the employee or themselves (if they are the sole employee of the company!) to have a salary sacrifice for 1/12 of the value of the bike deducted per month for a 12 month period.
Step 5) This gives Tax and NI relief for the VAT inclusive cost of the bike.
Step 6) At the end of the year, the employee has to buy the bike from the company, but this is at a massively reduced rate of only 5% of the original cost. After the year has finished the salary sacrifice will stop.
Step 7) The company will benefit too from corporation tax relief on the purchase of the bike, possibly reclaiming VAT on the bike and from reduced Employers NI due to the effect of the reduced salary for the 12 month period.
Rachel Macaulay, Carrington Accountancy Client and Budding Cyclist, Explains how easy it really is to ‘Get on Your Bike’
Q) How easy was it to arrange the scheme with the cycle retailer you selected? Were there any specific requirements from them?
A) Very easy; the most time consuming aspect was getting the voucher from Cycle to Work. This took about two weeks (I was impatient to get my bike). Once I had the voucher, I just phoned my shop of choice (I went to Evans but there are a large number to choose from) and picked out what I wanted. The store then added up the total, I signed a couple of forms and that was it. I picked up my bike a couple of days later.
Q) Did you purchase just the bike through the scheme or did you purchase other items that were included in the scheme?
A) I bought a lot! Bike, locks (get the best ones you can, and more than one to be safe), high-viz clothing, helmet, back rack and panniers, and a basket. Basically, make the most of the opportunity and get everything you think you’ll need.
Q) Have you experienced any problems with your payroll since you started the scheme?
A) No, Carrington took care of everything and I haven’t had any problems. At the end of the year, I was sent an email by Cycle to Work offering me the opportunity to buy the bike (which I did, at a cost of around £45).
Q) What tips / advice would you give to other contractors looking to use the Carrington Cycle to Work Scheme?
A) Have a budget in mind before you go shopping, it’s easy to get carried away. Discuss the scheme with Carrington before you get started and they’ll point you in the right direction, it really is quite straightforward.
For those who are based in London go to http://www.tfl.gov.uk/roadusers/cycling/11598.aspx for advice on routes and safety. They also offer free road lessons.
