The legislation that governs a Cycle to Work scheme states that the employer must own the equipment.

According to the HMRC, there can be no automatic right for employees to own the equipment at the end of the agreement. Therefore a Cycle to Work scheme operates as a loan. The employer is technically loaning the equipment to the employee for a fixed period of time.

The loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the bike and equipment to pass to the employee via an option (Managed Extended Hire, P11D or Market Value). Doing any other specified act by either party to the agreement (such as simply giving the bike and equipment to the employee) will cause the resulting agreement to be a hire purchase agreement rather than a loan agreement, which in turn could remove the tax exemption available as it may be classed as a hire purchase rather than a loan agreement. 

Furthermore, the employer may need to obtain a standard consumer credit licence from the OFT to enter into such an agreement since it would not be covered by the Cycle to Work group licence.

Although the employee does not actually own the equipment, they:

• are custodians of the equipment
• can benefit from any warranties
• are free to use it as they wish, providing it includes cycling to work

Employees cannot profit from, transfer, sell or dispose of the equipment.

They are not required to maintain records of cycle usage and there are no minimum use criteria; employees agree by signing the hire agreement that the main purpose of the bike is to cycle to work.

More information can be found on the HMRC website and in this HMRC Cycle to Work guidance document.