Better weather is finally here and you?re considering a cycle-to-work scheme. The trouble is the companies marketing them set a price cap of ?1,000 and you have your eye on a bike worth more. Is there a way to get what you want?

Cycle-to-work exemption

You probably know or have at least heard about the cycle-to-work tax and NI exemption. It allows your business to provide employees, including directors, with the loan of a bicycle and cycling equipment, but without it counting as a taxable benefit in kind. The main conditions are that:

  • all your employees (with some exceptions, e.g. casual workers) must be offered availability to a bicycle, exclusive to them or a pool bicycle
  • they mustn?t own it
  • they must mainly use it for commuting.

In practice HMRC takes a relaxed approach to the last condition and doesn?t expect you or your employees to keep a record of use.

Ready made cycle schemes

It didn?t take long after the exemption was introduced for ready-made schemes to appear and now you can take your pick – just search online. The attraction of these is that you don?t have to lay out the money buying the bicycles and equipment. Instead, the scheme provider owns them and hires them to you and in turn you make them available to your staff. They provide the hire contract for your employees, which is where the apparent price cap arises.

Consumer credit

The tax exemption doesn?t cap the price of the bicycle, however, the Office of Fair Trading (OFT) says that any hire agreement for the use of one is covered by the?Consumer Credit Act 1974?. But to prevent each scheme having to apply for a consumer credit licence, the OFT created a group one which automatically covers the hire or loan of bicycles provided under a cycle-to-work scheme where their value doesn?t exceed ?1,000.

Tip.?You don?t have to use a ready-made cycle-to-work scheme to take advantage of the tax and NI exemption. Although, you might get a different impression from the advertising blurb put out by some cycle-to-work scheme providers.

DIY alternative

If your business buys bicycles and makes them available to employees and directors, without a hire or loan contract, the exemption applies without the consumer credit problem or price cap. For example, if you and a fellow cycling mad director have your eye on a couple of road bikes costing say, ?2,000 each, your company can buy them and make them available to you. While that?s a lot of money to lay out, there?s more help from HMRC.

Tip.?You can reclaim the VAT and the remaining cost if the bike qualifies for a capital allowances (CAs) deduction, which can save your company tax equal to 19% of the cost.

Mix and match

There?s further good news. The exemption doesn?t require your company to offer bicycles on the same terms for all employees and directors. Therefore, you can use a ready-made scheme to provide lower value bikes to your staff while you pedal in luxury. This means your company doesn?t have to find a stack of cash to fund a scheme.