• ICAEW
  • KASHFLOW

 

0161 928 3276

 

 

We understand our clients

Cycle to Work Scheme Update

Newsletter issue - September 2010.

The cycle to work scheme allows employers to lend bicycles to their employees tax-free, and in some cases the employees can purchase the bicycle at the end of the loan period. However, the Taxman is looking carefully at abuses of this scheme...

  • Some employers treat the loan of the bicycle to the employee as part of the employee's salary and reduce their cash wages proportionately. This is known as a salary sacrifice, and the arrangement must be agreed with the relevant employee in advance. If bicycle are only provided to employees under salary sacrifice arrangements the whole cycle to work scheme may lose its tax exemption, as some employees cannot have their cash pay reduced due to the National Minimum Wage rate rules.
  • It is quite common for the employee to purchase the bicycle from the employer at the end of the loan period. However, the Taxman says that where there is an automatic transfer of the bicycle to the employee at the end of the loan period, the tax exemption for the cycle to work scheme is also lost.
  • The second problem with the transfer of the bicycle to the employee is how to establish the market value of the bicycle at that time. If the employee pays the employer less than the market value for the bicycle the difference is treated as employment income subject to tax and NI. As a top of the range sporting bicycle can cost several thousand pounds, the second hand value can be quite significant!

    The Tax Office have produced a table to help employers value second hand bicycles:http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

Finally, remember, to qualify as a tax free bicycle, it should be used mainly by the employee for travelling to work and on work related business, although other personal use is permitted. An expensive touring bicycle that is never used for work related journeys will not qualify for the tax exemption.

 

To work Smarter in your Business Contact Beauchamp Charles

Contact Us

"Join our newsletter for hints, tips and tax advice"

 

What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.