Bikes-for-work schemes were introduced by the government under the Finance Act 1999 to promote healthier commutes and reduce pollution.
What is the bikes-for-work scheme?
It is a tax-exempt scheme that encourages staff to cycle to work to promote healthier lifestyles and reduce environmental pollution. It enables employers to fund bikes and safety equipment and loan them to workers tax free.
Where can employers find more information?
Additional information can be found on the Cycle to Work Alliance’s website: www.cycletoworkalliance.org.uk .
Who are the main providers?
Providers include: Co-operative Flexible Benefits, Cycle Plus, Cycle Scheme, Cycle Solutions, Cycle Surgery, Edenred UK, Evans Cycles, Halfords, Hargroves Cycles and LHE Professions.
Employees see bikes for work as a valuable benefit and take-up continues to rise. The number of working UK residents who cycle to work increased by 90,000 between 2001 and 2011, according to figures released in February 2013 by the Office for National Statistics (ONS).
More than half (52%) of staff who take part in a scheme are new to commuting by bike, according to employee benefits provider Edenred UK’s publication The Employer’s Guide to Cycle to Work , published in May 2014.
Setting up a scheme
Introducing a bikes-for-work scheme to staff involves the employer signing up with a provider and purchasing or leasing bikes on behalf of their workforce.
The bicycles are lent to staff through a consumer credit agreement, and repayments to cover the cost of a bike can be made over 12 or 18 months.
Staff choose to acquire safety equipment through the scheme, such as a helmet, lights, reflective clothing and locks.
The consumer credit agreement allows a member of staff to lease a bike and related safety equipment up to the value of £1,000, including value-added tax (VAT). Employers that wish to offer staff equipment above this limit must apply for a employer-specific consumer credit licence.
Under the rules of the scheme, at least half of the bike’s usage must be for an employee’s commute to and from work , which can be all or part of their journey.
National insurance savings
The scheme’s allure could be down to the tax and national insurance (NI) breaks offered to employees and employers.
Staff can reduce their tax and NI liability when purchasing a bike for their commute through a salary sacrifice arrangement. Typically, a standard-rate taxpayer saves 32% and higher-rate taxpayers save 42%. Employers can save, on average, 13.8% of the total value of the salary employees’ sacrifice because of the consequential reduction in their NI contributions.
In many cases, employees benefit from reduced commuting expenses associated with public transport or running a car.
Terminating a lease
At the end of the lease, employers can give staff the option to buy their equipment through a transfer of ownership, which uses a fair market value (FMV) payment set by HM Revenues and Customs (HMRC).
Changes to value-added tax (VAT) in 2012 mean employers can no longer pass on VAT savings to their employees, and VAT must be accounted for on the monthly amounts paid by staff, because the scheme is seen as supply of a service.
Edenred UK’s guide found that those who come to work on a bike take on average 1.3 fewer sick days than those that do not.
Bikes-for-work schemes can also improve the health and wellbeing of staff, making them more productive and efficient during the working day. The Cycle to Work Alliance’s report T he Healthy Commute, published in February 2014, which surveyed more than 18,000 employees who use the scheme and 700 employers that offer bikes for work, found that respondents noticed improvements in health , increased fitness levels, increased lung capacity and a reduction in stress .
Bikes-for-work schemes promote greener transport options and are an eco-friendly commuting option for employees. In fact, 87% of employers say the schemes are important in reducing their carbon footprint and decrease the impact of commuting by reducing pressure on workplace parking and traffic, according to Edenred UK’s guide.
- Cycling to work is the second most popular salary sacrifice benefit , with just less than two thirds (62%) of UK employers offering it to staff. (The Benefits research , Employee Benefits , May 2014).
- 60% of employers offer staff a bikes-to-work scheme on a voluntary basis and 25% offer it on a flexible basis. (The Benefits research , Employee Benefits , May 2014).