Reward Gateway partners with the UK’s leading Cycle to Work supplier, Halfords Cycle2Work, to fulfil the RG Cycle to Work salary sacrifice solution for employers.
As a key member of the Cycle to Work Alliance, Halfords Cycle2Work supports and advises UK Government officials on how to encourage more people to complete short journeys by bike. The Cycle to Work scheme is a fantastic and cost-effective way for employees and employers to get more people out on bikes, boosting productivity and bringing innumerable health benefits.
Over the many years since the Government introduced the tax-efficient Cycle to Work scheme for employers, there has been one point in particular within its guidance which has caused confusion across the board: that of the £1,000 limit
Halfords Cycle2Work has been lobbying for further clarity on the original guidance for employers and a clearer understanding of how employers can potentially run a scheme that exceeds the £1,000 limit whilst remaining fully compliant with all prevailing legislation and regulation.
On 9th June 2019, the UK Government announced the release of the updated Cycle to Work guidance for employers. This updated guidance has brought about some complex market changes, which Halfords Cycle2Work has been working to understand further in the weeks since the new guidance was released.
Read the DfT's new Cycle to Work Scheme: Guidance for Employers
It’s really important that employers are able to fully understand the new rules so they can make an informed decision about the type of scheme that works best for their business.
So, upon full review of the guidance, Halfords Cycle2Work have now confirmed:
- The current scheme offered by RG Cycle to Work, via Halfords Cycle2Work, is fully compliant with the requirements of the updated guidance from the government. Access to a bike under this scheme is fair and equal to all, be it through salary sacrifice or via our single payment solution for employees on National Minimum Wage or National Living Wage.
- If an employer wishes to allow their employees to exceed the £1,000 limit for their Cycle to Work agreement, and they are not a Local Authority or do not have their own authorisation from the Financial Conduct Authority (“FCA”) to provide consumer hire of bikes, the new guidance allows them to use the FCA authorisation of a third party instead.
Halfords Cycle2Work is currently working with independent tax and legal advisors to finalise the new scheme documentation, which will be shared in August 2019. There are also a number of technical changes that need to be completed on the back-end of the RG Cycle to Work system to enable the £1,000 upper limit to be exceeded and set to the client’s new chosen limit. We anticipate this work to be complete in late Summer/early Autumn.
Any RG Cycle to Work clients who are keen to offer a new upper limit above £1,000 on their scheme can register their interest via this form. This will help us to understand the level of demand and we can work more closely with each client to ensure a successful rollout of the new limits.
Other points from the guidance
Employees can no longer top up their LOC with own funds
No, employees are not allowed to use their own funds towards the cost of goods being hired under a consumer hire agreement. This, however, does not preclude the employee from separately buying additional equipment. (No Topping up)
Can an employee keep the cycle at the end of the hire period?
At the end of the hire period an employee may have three options: Option 1: extend the hire agreement Option 2: return the cycle and equipment Option 3: buy the equipment under a separate agreement entered into at the time
There must be no option, whether expressed or implied, as part of or alongside the initial hire agreement for the employee to purchase the equipment at the end of the hire agreement. If there is, this is likely to make it a hire-purchase agreement (rather than consumer hire) where different regulatory requirements apply and it would no longer be eligible for the tax exemption. Therefore your employee scheme rules should not refer to ownership as an option, and any decision to sell the cycle or equipment to the employee should be entirely discretionary at the time.
Should bikes be insured?
Whilst the bike remains the property of the employer (or third party provider) throughout the hire term, the employee is responsible for its appropriate care, maintenance and security. Therefore it is recommended that employees take out separate insurance, or check if the bike is covered under their home contents insurance policy (in which case they should tell the insurer who owns the bike). Salary sacrifice payments should continue irrespective of any insurance claim.
National Minimum Wage and National Living Wage
All employees must be paid the National Minimum or National Living Wage. Your employee must not sacrifice salary to below this minimum (but all employees must be able to access a bike on the same terms as their colleagues). If a salary sacrifice agreement would put their salary below this threshold, you can: - offer the employee a lower value package and/or a longer than usual hire period - loan a cycle to the employee without a salary sacrifice arrangement.