For any businesses looking to go greener and reduce their carbon footprint, becoming a ‘cycle to work’ employer can have huge benefits.
As part of the scheme, employers can provide bicycles and cycling equipment to employees with a benefit in kind exemption – but only to those who meet certain qualifying criteria. If your employees are now working from home as a result of the COVID-19 pandemic, please take care to ensure the criteria is met. Here’s everything you need to know…
Some changes to the scheme
The main basis for this scheme is to use the bicycle / cycle equipment for work related journeys. However, as many of us have been working from home over the past year, the Government has recognised that many individuals have been unable to meet the requirement that the equipment is being used mainly for qualifying journeys. Therefore, the Government has announced a temporary easement to the conditions which must be met.
What are the normal rules?
Prior to the easement of the rules, employees could be provided with cycles and cycling safety equipment without any benefit in kind charge arising, provided that:
– Participation in the scheme is open to all employees;
– Employees do not transfer on the property of the cycle and or equipment; and
– The main use of those cycles and safety equipment is for journeys to or from the employee’s workplace in the performance of their duties (e.g. home to work travel or travel between workplaces)
What has changed in the rules since the COVID-19 outbreak?
If more than half of the cycling equipment’s use is for work related travel, HMRC will usually accept this as the equipment’s ‘main use’. However, the Government’s requirement to work from home where possible due to the coronavirus outbreak has meant that many individuals who participate in their employer’s cycle to work scheme have been unable to meet the ‘main use’ condition in 2020/21.
To mitigate this, the Government has introduced a temporary easement to the benefit in kind exemption for employees who, on or before 20 December 2020, joined a cycle to work scheme and were provided with a cycle and / or cycling safety equipment.
How will the new easement work?
To qualify for the exemption, employees who joined a cycle to work scheme on or before 20 December 2020 will not need to meet the ‘main use’ qualifying condition until after 5 April 2022. However, this is only a temporary easement of the qualifying condition and these employees will be required to meet the ‘main use’ condition during 2022/23 and subsequent years to continue qualifying for the relief.
Employees who joined a cycle to work scheme on or after 21 December 2020 will not qualify for this easement and must continue to meet all the normal rules for the exemption to apply.
What employers need to do…
Employers operating a cycle to work scheme are advised to inform their employees of the temporary relaxation in the rules and the potential impact, including the need for anyone who joined the scheme after 20 December 2020 to meet the qualifying journey requirement or risk losing the tax advantaged status of their cycle and / or equipment.
We advise all employers who offer the cycle to work scheme to ensure documentation is retained to agree the deduction from wages, and also ensure that any deductions in relation to the scheme do not bring the employee below the National Minimum Wage.
For advice or support relating to the cycle to work scheme, please get in touch with our payroll director, Julie Mason, via the button below.