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Although cycling is increasing in popularity during the pandemic, employment tax specialist Alastair Kendrick says employers must be careful how they use the cycle to work scheme.


In recent months, we have seen an upsurge of interest in cycling to keep fit during the pandemic. Therefore, a growing number of employers and their employees have been looking into the cycle to work scheme.


The growth in interest is strengthened by the removal of the cap on the value of the bike which can be bought in the scheme. Subject to approval by the employer with Financial Conduct Authority (FCA) authorisation, the previous £1,000 cap can now be exceeded.


If an employer is to use the scheme, the following conditions must be complied with for tax purposes:

  • An employee must not, at any point during the hire period, own the cycle;
  • At least 50 percent of the cycle’s use must be for “qualifying journeys”, i.e. commuting to work purposes;
  • The offer of the use of hired cycles must be made available across the whole workforce, with no groups of employees being excluded. This does not necessarily have to be through a salary sacrifice arrangement in each case.

The HMRC guidance also makes clear that it does not expect employers to actively monitor the use of the cycle to ensure the 50 percent of business travel is achieved. However, HMRC does want employers to ensure this is not abused.


In the past, I have seen employees acquire exercise bikes on the scheme which could clearly never be used for a business journey. More recently, I have seen employees acquiring expensive mountain bikes to use for leisure whilst working from home - again these would not pass the tax requirements and would leave the employer exposed if the scheme was reviewed by HMRC.


In the past, it was the case that at the end of the loan period the employee could acquire the bike at a negligible value. However, HMRC are now up to speed with what the second hand value of a bike is and they have published rates which can be used (see EIM 21667, EIM 21667a and EIM 21650 in the Employment Income Manual). If the bike is sold at what is considered a value below market value, a benefit in kind will arise on the employee concerned in regards to the difference.

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