Tax break boost for cycle to work scheme
Popular with cyclists and employers in the capital, hire agreement changes will allow tax breaks for cycle to work schemes over £1,000 without the need to be FCA registered.
The cycle to work scheme has been refreshed to clarify that cycles and equipment worth over £1,000 can be provided to employees without a tax charge. The increase will enable the scheme to encompass a wider range of bikes, such as e-bikes and bikes adapted for the disabled.
Under the cycle to work scheme, provided certain conditions are met, the provision of bicycles and safety equipment are income tax free and, if offered through salary sacrifice, generate national insurance savings for the employee and employer.
Salary sacrifice cycle to work schemes often involve the employer entering into a consumer hire agreement with the employee for the loan of cycling equipment. Organisations offering consumer hire agreements must be authorised by the Financial Conduct Authority (FCA), but employers who offer qualifying cycle to work schemes where the value of the cycling equipment provided to each employee does not exceed £1,000 are exempt from this requirement. Most employers therefore limit the value of cycling equipment to £1,000 to benefit from this exemption.
Many employers would like to offer higher value cycling equipment, and the Department for Transport has revised its cycle to work scheme guidance to explain how this can be put into effect. Under the updated guidance, FCA authorised third party providers can enter into agreements with employees and run cycle to work schemes on behalf of the employer and provide bikes and equipment worth over £1,000.
Employers who want to increase the value of equipment provided to over £1,000 will need to consider:
- the rules of their schemes, and
- national minimum wage implications,
and whether they must:
- obtain ‘limited permission’ FCA authorisation to act as a credit broker; or
- act as an ‘appointed representative’ of the scheme provider.
Liked this? Read these: