With Cycle Scheme, you can get a tax-free bike, which for most people means they save about 40% of the cost.
What is the Cycle Scheme and how it makes us different?
- What is the Cycle scheme and how it makes us different?
- How do employees get a tax-free bike for work through the Cycle scheme?
- Who can participate in the scheme?
- What is salary sacrifice and how do participants save?
- What are the savings for the employee and employer?
- What bikes are available through the scheme?
- Can a bike be provided by a mail-order specialist?
- Who actually owns the bike?
- Who is responsible for maintaining the bike and what happens if it is stolen?
- What’s the best way to ensure the bike?
- How do I return my bike?
- What is the maximum value bicycle and safety equipment package employees can select through the scheme?
- Does the bike have to be used for commuting?
- What happens at the end of the hire period?
- What happens if an employee leaves their job or is made redundant?
Cycle scheme provides unrivaled administrative and promotional services to employers of all sizes wishing to set up a Cycle to Work Scheme benefit for their employees. We offer the most admin-friendly scheme for employers and the greatest choice of bikes and equipment for employees. To get a better feel of who we are and what we do, here’s a list of some of the aspects of our service that we are most proud of:
- We are completely free of charge service to employers and their employees;
- With over 1,740 Partner Stores throughout the UK, we have the largest supplier network on the market;
- We only work with Independent Bicycle Dealers (IBDs) whose core products and services are dedicated to the promotion of cycling as a sustainable form of transport;
- Hence, scheme participants will receive expert and specialist advice when selecting the bicycle and safety equipment for their commuting needs;
- Our partner stores provide an unrivaled customer service experience and access to over 400 bicycle brands and the widest range of safety equipment;
- Free access to our secure, online Certificate processing tool – the Cycle scheme ‘Extranet’;
- Automation of scheme processes that minimize administration, allowing employers more time to look after their business;
- Provision of free of charge promotional material including Posters, leaflets, our ‘Cycle Commuter’ Magazine, and a host of electronic communications including our monthly newsletter;
- Knowledgeable and friendly Account Management and Helpdesk teams dedicated to helping employers and employees through the entire lifecycle of the scheme;
- Peace of mind that our scheme adheres to HMRC, Department for Transport (DfT) and Office of Fair Trading (OFT) Cycle to Work guidelines.
How do employees get a tax-free bike for work through the Cycle Scheme?
Step 1. Once an employer is partnered with Cycle scheme (employers can sign up here) all employees wishing to participate visit a local Cycle scheme Partner Store to choose the bike and, if required, safety equipment. To search for local Partner Stores click here.
Step 2. Employees then apply for a Cycle scheme Certificate online using a unique link to our secure extranet facility. The unique link is provided to employers and distributed to all employees. The employee will usually sign an online Hire Agreement at this time.
Step 3. If the employer approves their application they will countersign the Hire Agreement and pay Cycle scheme for the full retail price of the bike and equipment.
Step 4. The cycle scheme will then post out a paper Certificate, usually to the employee’s home address.
Step 5. The Certificate is then redeemed in the bike shop and exchanged for the bike package. Salary sacrifice then commences over the hire period (usually 12 months). The salary sacrifice is made prior to Income Tax and National Insurance contributions and, as a result, employees pay less of both. Most employers can pass on a VAT saving too.
Step 6. At the end of the hire period, the owner of the equipment may choose to offer the employee ownership of the bike for a market value payment, or the employee may pay a small deposit allowing them to remain in possession of the bike and continue to use it.
Please note that the above procedure applies to the vast majority of schemes, but there are some variations to the above. This variation depends on how the employer’s scheme is set up, i.e., the employer may use a finance company to fund the scheme (see below) or a benefits provider.
Who can participate in the scheme?
Any sized employer from any sector can partner with the Cycle Scheme. Eligible employees must receive salary via the PAYE system, and earnings should be more than the National Minimum Wage after salary sacrifice. Employers who pay staff close to the National Minimum Wage should contact Cycle scheme to discuss the range of attractive options available that allow lower-paid employees to participate in, and benefit from the scheme. There is no credit check for employees wishing to participate, and Under 18s can join the scheme if their guardian signs a guarantor agreement.
What is salary sacrifice and how do participants save?
Salary sacrifice occurs when an employee agrees to give up part of their salary for an agreed period (in the case of the Cycle to Work scheme this is usually 12 months) in exchange for a non-cash benefit, such as the loan of a bicycle and safety equipment. As salary sacrifice is taken from the gross salary (before tax) rather than net pay it means the employee pays less income tax and National Insurance. Most employers can pass on a VAT saving to participating employees.
What are the savings for the employee and employer?
Typical savings for employees are between 42% and 52%, but the actual amount depends on the employee’s personal tax band and the way the employer runs their scheme. Higher rate taxpayers will save more, employees whose company cannot reclaim VAT (the NHS, for example) will save less. If the employer uses external finance (i.e. borrows the money to buy the bikes from an outside agent) then savings will be approximately 5% lower.
Employers can typically save 13.8% of the total value of salary sacrifice, due to reductions in Employers’ National Insurance Contributions (NICs) due.
What bikes are available through the scheme?
Cycle scheme’s network of 1,740 Partner Stores provides access to over 400 different bicycle brands, including the UK’s most popular bike manufacturers. Many of our Partner Stores provide electric bikes, folding bikes, and other specialist cycles. Please select the ‘getting a bike’ tab at the top of this page and click on ‘Where can I get a bike?’ to use our Partner Store finder.
Can a bike be provided by a mail-order specialist?
Cycle scheme’s Partner Shops are capable of supplying bike packages by mail order, but there are distinct advantages to getting bikes from local bike shops that will be the first port of call for advice, servicing after-sales, and warranty. Some mail-order specialists are not part of the Cycle scheme Partner network. Please note that any delivery fees for mail order bikes must be paid outside of the scheme (i.e. do not qualify for tax relief).
Who actually owns the bike?
The bike and equipment remain the property of the employer throughout the hire period unless the employer uses a finance company to fund the bikes; in this case, the finance company or funding bank will own the bikes.
Who is responsible for maintaining the bike and what happens if it is stolen?
It is the employee’s responsibility to maintain the bike. Cycle scheme Partner Shops will be able to advise about maintenance and servicing depending on how the bike is used and stores offer a free first service. If the bike is stolen, as long as the employee replaces the bike and continues to use it mainly for commuting purposes, the employer can continue to take the salary sacrifice reductions from GROSS salary. This means the participant can still take advantage of the income tax and National Insurance Contribution (NIC) savings. The cycle scheme strongly recommends that scheme participants insure the bicycle and safety equipment as soon as they collect it from the store.
What’s the best way to ensure the bike?
Most cycle-specific insurance not only provides cover for the cost of theft replacement, but also provides personal and third party medical insurance cover and, in some cases, a roadside recovery service in the event of breakdowns. By ensuring the bike, scheme participants can now maintain their savings by avoiding hefty replacement costs in the event of theft and continue to enjoy the full tax exemption for the rest of the hire period. For further information on cycle-specific insurance please visit Cycle guard on www.cycleguard.co.uk (Cycle scheme participants can obtain a 10% discount on Insurance and Roadside Recovery).
How do I return my bike?
If you do not wish to take ownership of the Equipment or sign the Extended Use Agreement you must return the bicycle to Cycle scheme Ltd. You need to inform Cycle scheme that you wish to return the bicycle by writing to us at the below address:
Cycle Scheme Ltd
PO Box 3809
Bath, BA1 1WX
You must inform us of your intention to return the bicycle.
Once we have received written notice of your intention to return the bicycle, Cycle scheme Ltd will contact you with further instructions. Whilst Cycle scheme Ltd will not charge for disposal of the bicycle, you will be required to deliver or post the bicycle and are responsible for any financial cost in doing so. Once the bicycle has been received and verified as the original hired equipment you will be contacted with an acknowledgment of receipt and no further correspondence will be sent to you.
If you do not inform us of your intention to return the bicycle, this would result in a benefit in kind that should be declared on a P11D which may result in any tax savings, made during the hire period, being disallowed. Furthermore, you will be responsible for paying the Cycle scheme Ltd any costs that we reasonably incur in recovering the bicycle from you.
What is the maximum value bicycle and safety equipment package employees can select through the scheme?
The Office of Fair Trading (OFT) has issued a group consumer credit license to cover Employers implementing Cycle to Work Schemes that are limited at £1000 inc. VAT per Certificate. To view and download a copy of the license please clicks here.
Employers who have their own Consumer Credit License Category B (consumer hire) can allow employees to request Certificates of a higher value. Alternatively, employers wishing to increase the Cycle to Work Certificate value can apply for their own individual Consumer Credit License from the Office of Fair Trading. For further details please contact our Helpdesk on email@example.com.
Does the bike have to be used for commuting?
Employees should use the bike mainly for commuting to and, if relevant, between workplaces (at least 50% of the bike’s use should be for work purposes). However, the bike can also be used for non-work purposes and there is no need for employers to monitor individual usage or for employees to keep a mileage log. Please note that employees cannot claim business mileage allowance with a bike that is being hired to them by their employer.
What happens at the end of the hire period?
In order to preserve the tax benefits of the scheme, there can be no guarantee or obligation to transfer ownership to the employee immediately after the hire period has ended. However, employers generally choose to offer this option in addition to others, either directly or via the Cycle scheme.
At the end of the hire period, the Cycle scheme will contact employees to discuss the options available.
The most attractive option for employees will be to pay a small, refundable deposit (3% or 7% of the equipment value*) and continue to use the bicycle for an extended period of up to 36 months.
At the end of this period, if the employee does not wish to keep the bicycle, then Cyclescheme will refund the deposit in full. Alternatively, the Cycle scheme may at its discretion, offer ownership of the bicycle to the employee at this point, and no further action or payment will be required if they wish to keep the bicycle.
For more information, please refer to the article ‘HMRC Market Value Clarification‘ in our ‘Employer Updates’ section.
* The lower figure is for an equipment value of less than £500 and the higher one for equipment value of £500 or more. These figures include VAT.
What happens if an employee leaves their job or is made redundant?
Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 7 working days following the collection of the goods. This means that if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay i.e. without any tax exemptions.
For further information please see the Department for Transport’s Cycle to Work implementation guide: