The Cycle to work scheme is an initiative set up by the UK government as part of a wider aim of encouraging employees to make cycling and walking the natural choice for shorter journeys or as part of a usual longer journey. Focusing on the health benefits to the employees as well as the environmental benefits for the planet, the UK government have set up the Cycle to Work schemes to attract new cyclists by benefitting both employees and employers.
There are multiple models and variations of the scheme run by scheme approved suppliers. Of these schemes the most common one is the salary sacrifice scheme, this is where the employer either buys or leases the cycling equipment from the approved supplier and thereafter hires them out to their employees.
The scheme could essentially save employees up to 42% off the cost of the cycling equipment which includes the bicycle itself and the accessories to go with it by discounting the cost prior to income tax and National Insurance deductions.
For example, employees can save up to £420 on a £1,000 bicycle over 2 years along with the employer saving up to £138 a year.
Employers could also benefit from additional Capital Allowances on the scheme. The purchase of the cycles outright will be considered as a capital expenditure which therefore allows for capital allowances to be claimed on their purchase. Expenditure on cycles and cyclist’s safety equipment will also qualify for the Annual Investment Allowance (AIA). The AIA allows businesses to write off 100 per cent of qualifying capital expenditure currently up to £200,000 each year against the business’s taxable profits. For both Income Tax and Corporation Tax savings the Cycle to Work scheme may be very beneficial for employees and employers alike.
For more information and guidance on the Cycle to Work scheme, please visit the government guidance: Cycle to work scheme implementation guidance for employers – GOV.UK (www.gov.uk)