Cycle to Work - Key Points From the VAT Update From March, 2024 (for UK only) – RG Help Center

Overview

This is an article capturing the Value Added Tax (VAT) Update notes from March, 2024. The article offers information about what has changed and why the changes were made, along with pre and post-update comparisons. Links to a few of the frequently asked questions regarding this topic can be found at the bottom of this article.

When the Changes Went Into Effect

From the 1st of March, 2024, onwards, VAT is no longer included in the invoices sent to clients for Cycle to Work (C2W) Letters of Collection (LOCs).

The Reasons for the Update

The contractual relationship between Halfords and Cycle to Work has changed, and the agreement is now between Halfords and the employee. The contract starts when the employee redeems the letter of collection. At this point, VAT is accounted for by Halfords.

An Overview of What's Changed

Nothing major has changed for the client, apart from the fact that VAT is no longer included in the invoices sent by Reward Gateway for approved Cycle to Work applications. There will not be any cost savings for the client on the Cycle to Work applications made by employees due to the VAT update. If a client asks how this change impacts their ability to claim VAT, this is not something Reward Gateway can provide guidance on as we are not tax advisors, and it is down to the client to seek guidance on this from tax advisors.

Examples of the Invoices Before and After the Change

Invoice to a client prior to the change:

Example of an Invoice to a client prior to the change

Invoice to a client after the change:

An example of an Invoice to a client after the change

Comparison Table

	Pre VAT Update	Post VAT Update
Cost of the bike (excl. VAT)	£833.33	£833.33
VAT	£166.66	£166.66
Total Cost to the Client	£1,000.00	£1,000.00
Loan with employer	£1,000.00	£1,000.00
For employee, VAT incurred	On loan application	At the till with Halfords
For employer, VAT incurred	£166.66	nil