Frequently Asked Questions - Cycle to Work Scheme

To promote healthier journeys to work and to reduce environmental pollution, the 1999 Finance Act introduced an annual tax exemption, known as the Cycle to Work scheme, which allows employers to provide cycles and cyclists' safety equipment to employees as a tax-free benefit. The exemption was one of a series of measures introduced under the Government's Green Transport Plan.

Technically speaking, employees actually hire the bicycles from you, buying them at the end of the salary sacrifice period for a Fair Market Value payment (usually a nominal amount). The employer buys the bikes and safety accessories at full retail price, including VAT which is reclaimed in the normal way, if applicable. The balance is recovered from a reduction in the employee’s gross salary.

How do employers benefit?

• Employers also benefit from National Insurance contribution savings and will be able to treat the cost as capital expenditure and claim capital allowances in the normal manner.
• Savings for employers are always welcome, but running a Cycle to Work scheme also offers the tangible benefits of a fitter, more motivated, loyal and more productive workforce:
• Brighter, fitter, more punctual staff - a healthier workforce will lead to better performance at work and fewer sick days taken.
• Enhanced benefits package promotes staff loyalty
• Liberated car parking spaces
• Reduced organisational carbon footprint
• Promoting alternative transport initiatives will also show you have a keen interest in the local community and environmental issues.

Who is eligible to get a bike?

Employers of all sizes across the public, private and voluntary sectors can implement a tax exempt loan scheme for their employees.

To eligible, employees must pay PAYE, and have a contract that is longer than of the salary sacrifice period. They must also over 18 years old and earn more than the National Minimum Wage after the loan repayment has been deducted.

What is salary sacrifice and how are savings made?

With a salary sacrifice you pay back the costs of your bike (and any accessories) by reducing your gross pay for the length of the hire period (usually 18 months), rather than by paying out of your net pay – thereby saving income tax at your highest rate and NI contributions.

How much can I save?

Typical savings are between 30% and 50%, but the actual amount you pay depends on the rate at which you pay tax and whether your company can reclaim. This savings calculator assumes VAT can be reclaimed.

Can I get any type of bike?

You can choose any type of bike. Technically, there is no limit on the value or number of bikes you can purchase as long as the bikes will be used for half their time for commuting purposes.

However, if an employer wants to supply bikes with a retail price in excess of £1000 they will need a Consumer Credit Licence. The Office of Fair Trading has issued a group consumer credit licence designed to cover all employers setting up Cycle to Work schemes, limited to £1000 on any single bike.

A sample of our best selling Cycle to Work bikes is here.

Can I include other cycling accessories within the cycle to work scheme?

Yes, providing the total value does not exceed the Consumer Credit Licence, and the products fall within the scope of equipment that adds to the safety and security of the bike, rider or luggage (which covers most cycling accessories other than food!).

Can I add to the bike or make a contribution in order to obtain a higher value bike?

If you are limited to the group consumer credit license, you can add to the £1000 value of the bike, either by adding additional accessories or by making an additional contribution out of your own pocket, but the resulting bike in its entirety will be the property of your employer up to the point that you purchase the bike outright at the end of the salary sacrifice period (if you choose to do so).

Who actually owns the bike?

The bike remains the property of your employer until the salary sacrifice period ends, at which point you may be given the opportunity to buy the bike for a “fair market value payment” (usually a nominal sun). The fair market value cannot be stated before or during the salary sacrifice period as this could be considered a hire purchase (rather than loan or hire) agreement and would therefore not qualify for tax-relief under this scheme.

What happens if the bike is stolen or damaged?

If the bike gets stolen or damaged beyond repair you will be liable for any outstanding monies without any tax exemptions. It is essential therefore that the bike is insured. You can obtain safety equipment, including locks, as part of any cycle to work scheme as long as the total value of your bike and accessories is within the consumer credit licence limit. Such items are provided free of charge through Epic Cycles cycle to work scheme (for all bikes up to £1000 in value, other than special purchase, ex-display or custom built bikes).

Are there any conditions on my use of the bike?

The official Depart for Transport conditions are:

• Ownership of the equipment is not transferred to the employee during the salary sacrifice period.
• Employees use the equipment mainly (for 50% of the time) for qualifying journeys; i.e. for journeys made between the employees home and workplace, or part of those journeys (for example, to the station), or for journeys between one workplace and another.
• The Cycle to Work scheme is made available generally to employees of the employer concerned and not confined to directors or offered to them on more favourable terms.

Who is responsible for looking after the bike?

The employee is responsible for maintaining the bike. Epic Cycles offer a free first service and can always provide help and advice when needed. We also offer extremely competitive servicing rates after the first service.

What happens if I leave my job or I am made redundant?

The hire agreement linked to your salary sacrifice is non-cancellable, so you will be obliged to pay the remaining amount in full, without any tax exemptions.

Do I need a credit check?

No - this not a finance agreement. Your employer may choose to purchase the bike though a financing arrangement and may then choose to add the associated additional costs to your salary sacrifice deductions, but that is an internal company consideration and not part of the cycle to work scheme.

Do you run your own scheme?

Yes - please visit our information page on the Epic Cycles C2W scheme.