Gocycle GX folding e-bike being ridden in London.
Gocycle
Bicycles costing over £1,000–including e-bikes–will now be eligible for the U.K. Government’s Cycle to Work program. This 20-year-old money-saving salary sacrifice scheme was previously capped at £1,000 unless companies offering the benefit to their employees used their own Financial Conduct Authority (FCA) Authorisation. The new rules–announced by the Department for Transport on Sunday, June 9–remove the cap.
Cycling Minister Michael Ellis said:
Making sure that bikes are easily available is crucial to helping more people make the switch to greener modes of transport. Our refreshed guidance provides many incentives to help people do this.”
The Cycle to Work salary-sacrifice scheme was introduced in 1999 aimed at encouraging employees to buy bicycles for commuting. However, the £1,000-cap meant most e-bikes were ineligible for the scheme unless employers applied for their own credit exemption status.
The scheme allows employees to benefit from a long term loan of bikes and commuting equipment such as lights, locks and panniers, tax free. Only pay-as-you-earn (PAYE) employees are eligible for the scheme, meaning self-employed people have not been able to apply.
The typical saving for an average PAYE tax-payer was originally between 38-45% although this has been reduced over the years by clawbacks from tax authorities.
Employers loan bicycles to their staff as a tax-free benefit on the condition that the bicycles are mainly used to get to and from work or for work-related purposes. The employee “buys” the bike at the end of the load period for a nominal sum.
In 2005 this scheme was re-branded as Cycle to Work.
It has always been possible for any employer to set up their own Cycle to Work scheme. However, creating such salary sacrifice schemes requires a working knowledge of employment law and the intricacies of the tax system. The paperwork is tricky to complete and there are pitfalls for the unwary such as falling foul of minimum wage requirements, credit licences and the redrafting of employee contracts.
Because of these complexities most Cycle to Work schemes have been operated by third party providers. The new guidance states that FCA-authorised third party providers are able to run the scheme on their behalf.
The Office of Fair Trading issued a group consumer credit licence to cover employers implementing Cycle to Work schemes. The ceiling via these licences was £1,000, and it is this ceiling that has been removed in the latest guidance.
