The Cycle to Work Scheme allows the Employee to get a cycle and other related equipment at much reduced cost, at no cost to the Employer. The cycle must be used mainly for qualifying journeys, though it can also be used for leisure. It’s a government tax exemption initiative introduced to promote healthier lifestyles and reduce pollution, so it’s entirely legitimate AND actively encouraged by government. It is run under the tried and tested Salary Sacrifice arrangement.
Below we’ll cover:
- Summary of how it works
- Who is eligible
- Why Podium 4 Sport as your Cycle to Work partner?
Our summary of how it works
- The Employer agrees to operate the scheme and determines the basic rules – primarily the maximum value and scheme term.
- The Employee applies to their Employer to participate.
- Once the application is approved, the Employee chooses a cycle and equipment.
- The Employer buys them directly from the retailer, and hires them to the employee. By far the most common scheme rules allow a max. value of £1000 per employee and a term of 12 months, so to illustrate how it works let’s use those numbers.
- Using the Salary Sacrifice mechanism the Employer makes a deduction from GROSS salary each month for 12 months to recover that full cost (£83.33/month in this case).
- The Employee is exempt from Income Tax or National Insurance on that £83.33, giving a potential saving of 32% for a lower rate tax payer (20% tax and 12% NI), 42% for higher rate tax payers (40% tax and 2% NI).
- A further saving is available if Podium 4 Sport is the facilitating provider as we offer 10% discount on the cycle/equipment for the Cycle to Work scheme. In the example used that could mean either that you select goods to the value of £1111 and we charge only £1000, or you can take £1000 of goods for just £900.
- The Employer doesn’t pay National Insurance on the Salary Sacrifice amount either, so saves £138 over the 12 month term (13.8% NI on £1000).
- At the end of the scheme period most Employers complete the process by allowing the Employee to buy the cycle from them at a nominal cost. However, it is important that a transfer is not automatic from the outset. HMRC have set down pretty clear rules for how this should be done, which are noted in THIS helpful HMRC document. For more details about this see our Fair Market Value page – see the dropdown in the top menu under ‘About C2W’.
It’s an HMRC approved Salary Sacrafice scheme and no pre-clearance is required from them. If the scheme uses the most common limit of £1000 per employee there are no special Consumer Credit requirements. It is well tried and tested and we have supplied hundreds of cycles through multiple Employers of all sizes since the scheme was introduced, so we are very comfortable with it.
There are of course some different options available to Employers in exactly how they chose to operate the scheme. However, none of it is complicated and we are happy to come and discuss how best to make it work for you. Our objective is to make it as smooth, simple and user friendly as possible for both Employer and Employee, and we have the systems and experience to facilitate that.
Who is eligible?
Employers of all sizes across the public, private and voluntary sectors can implement a Cycle to Work scheme for their employees. Most employees paid through PAYE are eligible though there are some restrictions, such as the self-employed and employees under 18 or close to the National Minimum Wage. If an Employer offers it to any of their Employees, it has to be available to all of them, bar possible exceptions noted in the previous sentence. See the FAQs or contact us for more information.