Keep it simple to avoid tax

The cycle-to-work tax break seems to come with a mountain of literature to plough through, but is there a simple option?

Cycle-to-work basics

The legislation for the cycle-to-work tax break is unusually straightforward. It allows employers to provide a bicycle, with or without safety equipment, as a tax and NI-free benefit in kind.

Three simple conditions must be met:

  • the employee can’t own the bike etc.,
  • it is used mainly for qualifying journeys and
  • you offer the benefit to all your employees.

Complications

The trouble is the scheme is widely marketed through employee benefits specialist companies adding layers of complication to the simple tax break.

The government also upped the stakes by making it one of the benefits which still saves tax when used as part of a salary sacrifice arrangement. This gives employers a lot to pick through.

No cycle-to-work scheme required!

At its simplest all you need to do is offer your employees use of a bike and buy  as many as you need.

The bikes don’t all have to be the same value; you can give the employees a budget (perhaps linked to their seniority in the business) and let them choose. There’s no limit on the value of bikes that you’re allowed to provide.

After a while the bikes can be offered for sale to the employees at a modest price. HMRC suggests acceptable values: 18% to 25% of cost after a one year, and just between £1 and 2% of cost after five years.

That seems like a pretty cheap way to buy a bike tax efficiently!

Remember that providing the bikes is an extra cost to the business, however it can claim tax relief on their cost.

For further information please don’t hesitate to get in touch .