Cycle to Work FAQs | Employers

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  1. WHICH EMPLOYEES CAN USE THE CYCLE TO WORK SCHEME?

  • Employees who have contracts of employment that outlast the duration of the salary sacrifice period.
  • Employees must be 18 years or over in England and Wales, 16 years or over in Scotland.
  • Employees must pay tax via the PAYE system.
  • Employees must not drop below the minimum wage once the loan repayment has been deducted from their gross salary.
  1. WHAT IS SALARY SACRIFICE AND HOW ARE THE SAVINGS MADE?

A salary sacrifice occurs when an employee agrees to a reduction in pay in return for the employer providing a non cash benefit. The reduction comes out of the employee’s gross, rather than net pay. This causes a reduction in income tax and National Insurance payments, which is where the savings are made.

  1. MUST THE BICYCLE BE USED FOR WORK-RELATED JOURNEYS?

Yes. Employees must use the bike a minimum of 50% of the time for qualifying work related journeys travelling to and from work or between work sites. The bicycle can be used for recreational purposes the rest of the time.

  1. DO WE AS THE EMPLOYER NEED TO MONITOR THE USAGE OF THE BICYCLE?

  • No, by ensuring that the Hire Agreement, terms & conditions, FAQ’s and any other supporting marketing material clearly state that the bike must be used for a minimum of 50% for qualifying journeys, the employer is doing all that is required to ensure compliancy.
  • Edinburgh Bicycle Co-op staff are also trained and aware that the bicycle must be suitable for travelling to and from work.
  1. IS THERE A RESTRICTION TO THE BICYCLE AN EMPLOYEE CAN CHOOSE?

The bicycle must be suitable for travelling to and from work. For this reason children’s bicycles are not available to hire under the scheme.

  1. CAN OUR STAFF TAKE ADVANTAGE OF EDINBURGH BICYCLE CO-OP’S SALES OR EXCITING OFFERS?

Yes. There is no restriction or added fees to bikes and equipment featured in a sale or on offer.

  1. CAN EDINBURGH BICYCLE CO-OP OFFER A MAIL ORDER SERVICE TO OUR STAFF?

Yes. Edinburgh Bicycle Co-op can offer a mail order service including free delivery to organisations and its employees.

  1. IS EDINBURGH BICYCLE C0-OP ABLE TO OFFER A DELIVERY SERVICE WHERE AN EMPLOYEE VISITS A BRANCH AND THEN ARRANGES FOR THE BIKE AND EQUIPMENT TO BE DELIVERED TO THEIR HOME ADDRESS?

Of course. We offer a free weekday delivery service on orders over £20.

  1. HOW LONG IS THE REPAYMENT PERIOD?

The normal length of the repayment period is either 12 or 18 months. Ultimately the employer makes this decision, though Edinburgh Bicycle would not recommend a repayment period of more than 18 months. An employee would have the right to cancel the lease agreement after 18 months, unless an exemption from the Office of Fair Trading is received to stop employees from doing this.

  1. WHAT ARE THE SCHEME’S RULES?

As the bicycle & equipment will belong to the employer, the employee must:

  • Make sure that the goods are insured. The easiest way to do this is to get it added to household contents insurance, if it is not already covered. Replacement bicycles are not available under the scheme. If the bicycle goes missing or is damaged, the employee will still have to pay the monthly amount for the remainder of the repayment period.
  • Keep the bicycle clean and in good order.

The following rules apply so that the employee does not pay tax on this benefit:

  • The bicycle is used primarily by you to commute to work;
  • The bicycle remains the property of the employer for the length of the repayment period.
  1. WILL THE EMPLOYEE OWN THE BICYCLE AND EQUIPMENT AT THE END OF THE REPAYMENT PERIOD?

Not automatically. To be able to save on the tax and National Insurance contributions, the agreement must be a Hire Agreement not a Purchase Agreement.

Having said that, at the end of the hire period it’s often the case that the employer offers to sell the bicycle and equipment to the employee for a fair market value. HMRC issue guidelines on calculating the previously hired bicycle’s fair market value. Please follow this link for more details.

Alternatively the employer may allow the employee to continue using the bicycle, free of charge, without ownership of the bicycle being transferred to the employee.

However employees must be made aware that the employer cannot guarantee either offer – the sale of the bike or its continued loan to the employee – until the end of the agreed hire period.

To discuss the various options for dealing with the transfer of ownership please contact us.

Bike to Work Scheme Manager: 0131 319 2400 ext 107

General Enquiries: 0131 331 5010 or 0345 257 0808

Or email: enquiries@edinburghbicycle.com

  1. HOW MUCH CAN AN EMPLOYEE SPEND?

Typically, the limit on the scheme is £1,000.

If an organisation wishes to offer bicycles and equipment to the value of more than £1,000, the employer must have a Consumer Credit License. A Consumer Credit License can be purchased from the Financial Conduct Authority.

Employers are free to set the limit per employee below £1,000.

  1. WHAT HAPPENS IF THE EMPLOYEE LEAVES THE EMPLOYER BEFORE THEY HAVE REPAID THE FULL AMOUNT?

The employee will have to repay the outstanding amount that is left to pay from their final payslip. However, this amount will not be tax-free as it will be taken from their net salary.

For example, if the hire agreement is for a £300 bicycle and the employee has paid £200, he/she will have to pay the remaining £100 outstanding on the bicycle.

The employee will not be entitled to receive the Tax and National Insurance savings on this outstanding £100. However, they will still have benefited from saving the Tax and National Insurance contributions on the first £200.

If the employee’s final salary does not cover the outstanding amount, they will be sent an invoice for the remainder of the balance.

Ownership of the bicycle remains with the employer who may then seek to dispose of it for a fair market value. HMRC issue guidelines on calculating the fair market value of a bicycle. Please follow this link for more details.

 As with all matters to do with our Bike to Work Scheme, to discuss the various options for dealing with the transfer of ownership please contact us.

Bike to Work Scheme Manager: 0131 319 2400 ext 107

General Enquiries: 0131 331 5010 or 0345 257 0808

Or email: enquiries@edinburghbicycle.com

  1. WHAT HAPPENS IF THE BICYCLE HAS A WARRANTY PROBLEM DURING THE HIRE PERIOD?

When the employee chooses a bicycle and equipment, Edinburgh Bicycle Cooperative will advise them of the warranty period, as they vary with each bicycle – some bicycle frames feature a 5 year, 10 year or even lifetime warranty.

If the employee experiences problems within the duration of the warranty period, Edinburgh Bicycle Cooperative will liaise with the supplier on the employee’s behalf. The employer, despite owning the equipment, will not need to be involved in the warranty process at all.

  1. HOW MUCH WILL THE SCHEME COST TO IMPLEMENT?

 Edinburgh Bicycle Co-op will not charge your organisation for implementing the scheme.

The cost of implementing a Bike to Work Scheme can be negligible. Some administration duties are detailed below (section 16) but there are also significant opportunities for the employer to save while using the scheme. For example, for every £500 an employee hires on the scheme, the employer saves £69 NI contributions. Private companies can also claim capital allowances on the cost of the bike and safety equipment while they are owned by the employer.

There are also additional opportunities for employers to create further revenue. For more information about these opportunities, contact Edinburgh Bicycle Co-op.

Bike to Work Scheme Manager: 0131 319 2400 ext 107

General Enquiries: 0131 331 5010 or 0345 257 0808

These savings can help offset any setup costs. If additional revenue is created from implementing a scheme, this revenue is often used to improve cycling facilities within the organisation.

  1. WHAT IS THE ADMINISTRATION PROCESS INVOLVED IN SETTING UP THE SCHEME?

Edinburgh Bicycle Co-op offers two slightly different processes depending on the size of the employer’s organisation. A BACS process for smaller employers and an invoice account process for larger employers (normally with more than 300 employees).

The level of administration to set up the scheme is outlined here:

BACS Accounts

  • Making the legal documentation as supplied by Edinburgh Bicycle Co-op available to all staff.
  • Assist in marketing the scheme using the tools provided by Edinburgh Bicycle Co-op, including putting up posters, sending out staff emails and ensuring FAQs are made available to all staff.
  • Checking the eligibility of employees and managing the signing of the Hire Agreement. Edinburgh Bicycle Co-op supply the required paperwork free-of-charge to the employer.
  • Making the BACS payment to Edinburgh Bicycle Co-op following the instructions provided.
  • Implementing the salary sacrifice process.
  • Managing leavers from the scheme.
  • Managing the fair market value payment if required.

Invoice Accounts

  • Assist in marketing the scheme using the tools provided by Edinburgh Bicycle Co-op, including putting up posters, sending out staff emails and ensuring FAQs are made available to all staff.
  • Checking the eligibility of employees and issuing vouchers (Purchase Orders).
  • Implementing the salary sacrifice process.
  • Paying invoices from Edinburgh Bicycle Co-op within agreed terms.
  • Managing leavers from the scheme.
  • Managing the fair market value payment if required.
  1. WILL WORK RELATED PAY BENEFITS BE AFFECTED?

Yes. There may be an impact on an employee’s entitlement to benefit payments such as Statutory Maternity or Paternity Pay, Statutory Sick Pay and Working Tax Credit, as they will be calculated on the employees reduced pay. There may also be an impact on the employee’s state pension.

  1. AS IT’S A BENEFIT, DOES THE EMPLOYEE NEED TO TELL THE INLAND REVENUE?

No. The scheme is set up so that under the current tax rules the employee does not have to pay tax on the benefit and therefore the employee does not have to notify the Inland Revenue.

  1. AS IT’S A BENEFIT, DOES THE EMPLOYER NEED TO TELL THE INLAND REVENUE?

The employer does not need to inform the Inland Revenue prior to the start of the scheme.

However, it is advised that the employer submits an example of an employee’s payslip prior to the scheme starting and an example of an employee’s payslip once the salary sacrifice has been started to ensure the reductions have been implemented correctly.

  1. CAN A SOLE TRADER TAKE ADVANTAGE OF THE BIKE TO WORK SCHEME?

If you use the PAYE scheme, you can buy the bike as an employer and lease it back to yourself as an employee, thus giving yourself the opportunity to make attractive savings. We advise seeking financial advice from your accountant regarding whether the scheme is suitable for you.

  • If, like many sole traders, you pay yourself an occasional lump sum rather than a regular salary, you will not be able to commit to a monthly salary sacrifice, so you won’t be eligible to join the Scheme.
  • You can still make savings however, if you intend to use a bicycle for work-related journeys. You would purchase the bike from Edinburgh Bicycle in the normal way (with a company credit card, cash or by making a BACS payment) then claim back capital allowances and write the purchase off against tax. If you are VAT registered you may also be able to reclaim the VAT. To do either of these you will require an invoice from Edinburgh Bicycle addressed to your company and we can supply this to you if you complete the Small Employer application form.
  • This facility is explained in section 5.3 of the Department for Transport Cycle to Work Scheme implementation guidance booklet (PDF, 67KB). Edinburgh Bicycle Co-op recommends that you discuss this option with your accountant before purchasing the bike.
  1. WHERE CAN I OBTAIN MORE DETAILED INFORMATION ABOUT THE SCHEME?

You can find out more about Bike to Work by downloading the Department for Transport Cycle to Work Scheme implementation guidance booklet.

And of course you can contact Edinburgh Bicycle Co-op direct.

Bike to Work Scheme Manager: 0131 319 2400 ext 107

General Enquiries: 0131 331 5010 or 0345 257 0808

Or email: enquiries@edinburghbicycle.com


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