CycleScheme, Bike2Work and Ride to work Tax Free!
Who are Cyclescheme,Bike2Work Scheme and Bikes for the NHS (SME HCI LTD)?
Cyclescheme is the UKâ€™s number one administrator for the Governmentâ€™s Green Transport Plan Initiative. Cyclescheme offers the most admin-friendly scheme for employers and the greatest choice of bikes and equipment for employees.
Whatâ€™s the process of getting a tax free bike for work?
- Step 1. Once an employer has entered into a contract with Cyclescheme (employers can sign up via this website) any employees wishing to participate need to visit a Cyclescheme Partner Shop to choose the bike and, if required, safety equipment. Find participating bike shops using the search on this website.
- Step 2. Employees then apply for a Cyclescheme Certificate by finding out their Cyclescheme Employer Code and entering the information provided by the bike shop online. 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 Cyclescheme for the full retail price of the bike and equipment.
- Step 4. Cyclescheme will then issue a Certificate to either the employee or the employer, wherever is requested.
- 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).
- Step 6. At the end of the hire period the owner of the bike may choose to offer the employee ownership of the bike for a full market value.
Please note that although the above procedure applies to the vast majority of schemes, there are some variations to the above which are a result of the way an employerâ€™s scheme is set up, such as if they are using a finance company (see below) or a benefits provider.
Who can participate in the scheme?
There is no minimum or maximum company size necessary to sign up to the scheme. Eligible employees must: be paying PAYE, earn more than the National Minimum Wage after salary sacrifice, and have a contract that does not end during the hire period. Employees who earn close to the National Minimum Wage following salary sacrifice may wish to discuss with their employer the option of loan or pool bikes. There is no credit check for employees wishing to participate.
Under 18s can join the scheme if their guardian signs a guarantor agreement.
What is salary sacrifice and how are savings made?
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 some kind of 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. Employers that can reclaim VAT usually pass this saving on to their employees, which increases savings further. Employers also save on Secondary Class NICs (usually around 12.8%) as the amount theyâ€™re paying in wages is also lower. See www.hmrc.gov.uk/specialist/salary_sacrifice.pdf for a more detailed explanation.
What are the savings?
Typical savings are between 40% and 50%, but the actual amount depends on the employeeâ€™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.
What bikes are available?
Employees can choose any bike â€“ including electric bikes, folding bikes and other specialist cycles. If the employer wants to supply bikes costing over £1000 (retail price including VAT) they will need to purchase an individual Consumer Credit Licence, so many employers limit the package value to £1000 inc. VAT. Please note that obtaining bikes for friends and family is not permitted; the bike must be for the employee.
Who actually owns the bike?
The bike and goods 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 employeeâ€™s responsibility to maintain the bike. Cyclescheme Partner Shops will be able to advise about maintenance and servicing depending on how the bike is used and many shops offer a free first service. If the bike is stolen the employee will be liable for any outstanding monies without any tax exemptions, so itâ€™s very important that employees insure the bikes. Safety equipment including Home Office-approved â€˜Sold Secureâ€™ D-locks and cable locks can be obtained as part of the scheme.
Whatâ€™s the best way to insure the bike?
Household policies are usually the cheapest option but employees must ensure that the insurer covers the bike when in storage away from your home, and that the bikeâ€™s value doesnâ€™t exceed the upper claim limit. If the bike canâ€™t be covered on a home insurance policy, we recommend Cycleguard (www.cycleguard.co.uk) for insurance (who offer Cyclescheme customers a 10% discount).
Does the bike have to be used for commuting?
Employees should use the bike mainly for commuting to and, if relevant, between work places (at least 50% of the bikeâ€™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 can not claim business mileage allowance with a bike obtained under the scheme as the bike belongs to the employer.
What happens at the end of the hire period?
At the end of the hire period employees may be given the opportunity to buy the bike for a full market value, however this cannot be an automatic entitlement. The cost of full market value cannot be stated before or during the hire period as this could be considered a benefit in kind and therefore not be eligible for tax benefits. Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme.
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 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.
How to order through the Cycle to work scheme,Bike2work scheme and Bikes for the NHS (SME HCI LTD)
Please note. Ordering a discounted bike through the Cycle to work scheme/Bike2work Scheme/Bikes for NHS you will be paying the listed price plus 11% / 15% for NHS SME HCI LTD or the RRP price which ever is lower . This is because Cycle to work scheme/Bike2work Scheme/NHS take a percentage of the value of the bike. Once you have placed an order we will send you an invoice for the correct amount to apply for.
- Step 1Simply place the items you require in your basket and proceed to our checkout.
- Step 2Select Option 2 'Standard order' as your checkout method (its the pencil and paper picture shown below).
- Step 3In the 'Additional Comments About Your Delivery/Order' box you must state that you are using the Cyclescheme/Bike2work scheme as your method of purchase and supply your employers name in the box.
- Step 4Continue through the checkout to log your order with us, an order number will be generated and you should use this as your reference should you need to contact us.
- Step 5You can now apply for your voucher through your employers or the Cyclescheme/Bike2work Schemes intranet system, Using the code Ranelagh where requested.
- Step 6Once you have received a voucher for the correct amount (usually a couple of days) email us the voucher along with a copy of photographic ID (Driving licence, Passport) and we will process your order and send the bike out to you in a box,please notify us if wishing to collect from store,made up ready to ride away.