Who is eligible for the Cycle to Work programme?
To qualify for the tax exemption, the cycles and cyclists’ safety equipment loaned by the employer under the scheme must be available to employees generally with no groups of employees excluded.
Employees may find their application is unsuccessful if:
- They have not returned a signed Hire Agreement by the required date.
- They are already in a Cycle to Work Hire Agreement as the rules of the scheme state that an employee cannot be in more than one agreement at any one time.
- The amount applied for takes their salary below National Living Wage.
What is the maximum value of equipment that can be obtained through Cycle to Work?
The Office of Fair Trading has issued a Group Consumer Credit License allowing any employer to run a Cycle to Work scheme up to £1,000 inclusive of VAT.
However, the actual value is up to the employer's discretion.
What happens if the employee leaves or gets made redundant before the end of the hire period?
If the employee leaves before the end of the hire period, they must pay their employer the balance of the amount outstanding, and this will be deducted from their final net pay. The employee will no longer be able to benefit from the tax exemption.
However, this transfer of ownership is the subject of a separate agreement and isn't governed or influenced by the Hire Agreement the employee signs for this scheme.
Can they select more than one bike?
Employees may only enter into one hire agreement at a time, so if they did wish to purchase two bikes then they must both be purchased using the same Certificate.
The legislation does not prohibit the selection of two cycles providing that both are used for commuting to work. For example, they may have a summer route and a winter route to work, both requiring different things from a bike. Or they may have a bike to ride from home to their local railway station and another bike at their destination railway station that is used to complete the final phase of their journey to work.
Bear in mind that employees can only apply for one Certificate at a time, so for example, if they applied for a £1,000 Certificate they would only be able to spend a total value of £1,000 to purchase both bikes.
What if the bike gets stolen or damaged?
It is recommended that employees obtain separate insurance, or check that it is covered under their home contents insurance policy. If their home contents insurer covers the bike, they must inform them the insurer that their Employer (or the Employer's nominated agent, if applicable) owns the bike.
Payments from the employee's salary will not stop or be suspended due to loss or damage to the bike.
What happens to salary deductions during Maternity or Sick Leave?
If the employee is absent from work during the period covered by the Hire Agreement, their salary reduction will remain in place and will apply to any pay received (including sick pay or maternity pay). By entering into the Hire Agreement the employee agrees that the amount of the monthly salary reduction may be deducted from any such payments.
However, this will not include statutory maternity or sick pay.
Statutory maternity pay is paid for the first 39 weeks of the employee's maternity leave. When an employee is on leave due to sickness, their normal pay ceases and is replaced by a sickness allowance. This allowance is made up of money from the employer, called Occupational Sick Pay (OSP) and money paid on behalf of the Inland Revenue/ Government called Statutory Sick Pay (SSP). Deductions for Cycle to Work would still be made from the OSP but not from SSP.
If the employee is temporarily not in receipt of salary payments for any reason, but remain an employee of the client, their Hire Agreement will remain in place and monthly reductions suspended until the earliest of the following events: the employee reverts to receiving salary payments, or they leave employment with the Employer.
If monthly reductions are suspended, the hire period will be extended by a period equivalent to the period during which monthly reductions were suspended.